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Real estate continues its recovery, but there are still those that do not qualify for traditional bank financing, and while Minnesota contract for deed can be a great alternative, brokers do have a lot of questions.

With that in mind, we decided to put together a list of Realtor contract for deed FAQs to help all brokers navigate the buying process when using the contract for deed financing method.

What is a contract for deed?

A Contract for Deed is a tool that can allow buyers who either don’t qualify for traditional lending options or who want a faster financing option to purchase property.

“Under a Contract for Deed, the buyer makes regular payments to the seller until the amount owed is paid in full or the buyer finds another means to pay off the balance. The seller retains legal title to the property until the balance is paid; the buyer gets legal title to the property once the final payment is made. If the buyer defaults on the payments, the seller can repossess the property. In some states, a seller who repossesses a property must reimburse the buyer for the fair value of improvements to the house, as well as a reasonable amount for rent.” via rocketlawyer.com

Why present a MN contract for deed to my clients?

Contract for deed can work when you have clients that cannot qualify for conventional mortgage financing. This can happen because of:

• Job loss.
• Bad credit.
• High debt/income ratios.
• Small business ownership.
• Non-provable income.
• Previous BK.
• Previous foreclosure.
• No credit history.
• Unfriendly loan officers.
• Immigration issues.
• Tight lending environments.

How do I find sellers that want contract for deed financing?

A Google search will locate some of these—try Googling “homes for sale by owner mn”– but there are companies that will buy a property and then sell it to your client.

OK, my client found a seller? What do I do now?

If the seller is represented by a broker, contact that broker. You will want to protect your buyer by doing a title search. The seller should draft the actual contract for deed, and the buyer—that you represent—should retain an attorney that will read, comment and possibly suggest contact for deed revisions to better reflect the buyer’s interests.  Once the seller and buyer agree on a contract for deed and its terms, you can schedule a closing. The buyer’s attorney can assist with this. If the seller is not represented by a broker, you may have to further assist with the mechanics of the sale, and it is then imperative that the Minnesota buyer retains a competent attorney.

My client found the perfect home, but can’t get financing. The seller won’t do a contract for deed. Is my deal dead?

This is a case where a company like C4D can help. Simply, C4D–of course after it completes its due diligence–can offer to buy the home from the seller. Then C4D can sell the home to your buyer with a Minnesota contract for deed. Follow these simple steps:

• Locate the property.
• Contact C4D.
• Assist your client with the C4D application process.
• If the deal is approved, closing can occur quickly.

What happens next?

You are paid your commission, your buyer moves in, and at the completion of the contract your buyer becomes a homeowner.

Who actually owns the home in the meantime?

As in all contract for deed sales, C4D, the owner, retains the deed until all payments have been made.

Who are the people at C4D? Are they wealthy investors or what? Where do they get cash to buy all of these homes?

C4D works with its own set of preferred lenders to finance contract for deed sales.

What makes C4D different? How do they work around things like due on sale clauses?

C4D’s lenders know and trust C4D, so the company’s lenders do not require due on sale clauses in any of their C4D loans.

As you can see, C4D is dedicated to help people make the transition from tenants to homeowners through the contract for deed process. Sure, traditional mortgages are great, but if you have a client that has problems qualifying, call C4D today!

In some states, especially Minnesota, contract for deed is a popular alternative to a traditional mortgage. What is contract for deed? It is a type of seller financing where monthly payments are made to the seller over a prescribed time period. Unlike a traditional mortgage, however, the property deed remains with the seller, and while the buyer occupies the property, the buyer will not actually own the premises until all payments have been made.

Why Do a Contract for Deed in Minnesota?

Contract for deed is often used when the buyer cannot qualify for a traditional bank mortgage. This problem can occur for many reasons including:

• Bad credit.
• Non-provable income.
• Business ownership.
• Divorce.
• Prior bankruptcy.
• Tax liens.
• Court cases.
• Tight lending standards.
• Appraisal issues.
• Previous foreclosure.
• High student loan debt.
• Job loss.
• Illness.
• No credit history.

Minnesota home buyers with any of the above issues may find that contract for deed financing is a nice solution.

The Advantages to Contract for Deed

The advantages of contract for deed in Minnesota include:

• No bank scrutiny.
• More flexible terms.
• Personalized interaction with the property owner.
• Bad credit is not necessarily a problem.
• Quicker turnaround time.
• Appraisals may not be necessary.
• Property improvements can be made.
• There are ownership tax benefits for the buyer.
• MN contract for deed is a great way to build credit.
• No pre-payment penalties.

The Disadvantages

Some disadvantages of a contact for deed in MN could be:

• More rapid foreclosure parameters.
• Unethical sellers could offer a contract for deed on an encumbered property.
• Higher interest rates.
• Title stays with the seller until paid in full.

Is Contract for Deed for You?

Redfin says that nationwide housing sales are still strong:

Mortgage lending requirements have somewhat loosened, more buyers can now qualify, and rates are low:

Still, if you have injured credit, you may not be able to qualify for a traditional loan, and, if you are renting, your monthly payment goes directly to your landlord with no benefit for you. This is where a contract for deed arrangement can really be an excellent benefit.

Look at this comment from the Minnesota Home Ownership Center:

“The use of contracts for deed to buy a home is on the rise. The foreclosure crisis has resulted in tighter loan underwriting standards, leading to fewer qualified buyers. At the same time, an increase in bank foreclosures means more homes are for sale at reduced prices. Investors often purchase these homes for cash and then offer them for sale using a contract for deed. Since contract for deed agreements take place without the underwriting criteria set by conventional lenders such as FHA, they are attractive to buyers that are not able to meet these restrictive requirements. Contract for deed agreements are attractive to home sellers because they open up the market to more buyers who, for a number of reasons, cannot find a mortgage-ready buyer to purchase the property.”

And while banks like to pigeonhole prospective buyers like this (image below), you will find a lot more flexibility with a Minnesota contract for deed transaction.

A Lot to Consider

We’ve shown that contract for deed financing can be a good alternative to traditional mortgages especially if you have credit issues. Of course, due diligence is very important, and you want to make sure that your seller legitimately desires to make the contact work for both of you. The Atlanta Legal Aid Society advises, “The key to making these agreements work is to go into them with your eyes open to all the possibilities, to make payments on time, and to work on repairing your credit to the point where you’ll qualify for more traditional financing.”

C4D

A company like C4D is a great place to start; their unique approach allows you to bring your dream home to them, they actually purchase it, and then they sell it to you. And if you want us to help you find a home, that works, too. We have a team of realtors ready to get the search started for you. These transactions are legal, regulated and fair, and even your real estate broker’s commissions are protected.

If you’ve found your home, congratulations! If you have it financed, that’s great, but if you are turned down by the bank, don’t give up—contact C4D.