Contract For Deed A Contract For Deed?

Comments(7)

• 
  myfrogger14th September, 2004

  In theory this should work. My ownly concern is that a high percentage of contract buyers don't refinance the home. If you have a balloon of 5 years and 5 years comes up and your buyer's haven't bought--what are you going to do?
  
  Just make sure you buy with a large enough window that you don't cause yourself problems.
  
  This works better using lease options because if your end tenant/buyer doesn't excersize his/her option, worst case you don't excersize yours...

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  InActive_Account14th September, 2004

  I bought CFD for 75,000@7% for 30yrs with balloon in ten years. I believe I could contract for deed it for 90,000 with 5,000 dwn with a two or three year balloon and tht would give me plenty of time to kick them out if they don't exercise the option. The question still remains.. Can this be done? When my buyer refinances will it be like a double closing?

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  active_re_investor14th September, 2004

  1. Yes - it can be done.
  
  2. You will have two closings or you can work out other arrangements. If you want the buyer to not see what you paid until later (it will be in the public records) then two closings
  
  3. It is a bit messy in that there is a lot of paperwork flying around and the deal is not done until it is done. The buyer's lender might have a problem when they notice you and your purchase price. Less of an issue a few years out. Seasoning and the rapid price rise based on when the deals are completing. Not something to stop you, just something to be aware of so you are prepared.
  
  4. You could also do a lease/option rather then a CFD if you like. It is not the same and there are tax and ownership implications. Just trying to make sure you know you have options.
  
  John
  [addsig]

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  InActive_Account14th September, 2004

  Thanks John. Big help

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  moveitnow15th September, 2004

  Be careful. One of the basic tenants of real estate is that you cannot sell what you do not own. You cannot even advertise it for sale. Since you bought on a CFD, you do not own the house (no deed, no ownership).
  
  You can market it, if you have a RE license, but you cannot sell it on a CFD, legally.
  
  What happens if your seller backs out? Are you going to sue them to get them to sell? What if you are asked in court if you own the house (you are not on title)? Will you lie under oath?
  
  I believe in Sub2 investing, but you have to be careful and be honest, and keep it legal. Read some of the comments on the state AG's going after investors and think what could happen.
  
  Use a L/O (you can sub-lease as long as your CFD doesn't disallow it) or just rent it. Plus, you get to keep the tax deduction.
  
  Good luck
  
  Peter

• 
  InActive_Account16th September, 2004

  Here is the exact wording my contract reads.
  ASSIGNMENT OR SALE BY BUYER
  Buyer shall reserve the right to sell, assign, transfer or convey any interest in the Property or this Agreement. Such assignment, sell, or transfer shall not be a cause for rescission of this Contract and shall be subject to the terms of this Contract.

• 
  moveitnow16th September, 2004

  Nice wording (not being sarcastic). Unfortuantely, you can't rewrite the law in a contract. I'm not an expert, so please check with your attorney, but all I've ever heard is that you cannot market/sell RE you do not own, unless you are a broker. Even then, you have to follow the rules in your state.
  
  I was just pointing out the risks. If you think it is worth it, that is your choice. I, personnaly wouldn't risk my ass(ets) in a lawsuit. 2-3 years is a long time to wait and a lot can go wrong. Especially with zealous AG's looking at RE investors.
  
  I'd use a L/O and give a generous rental credit to keep your buyer from bolting.
  
  Peter