Contract For Deed – Cannot Sell

Contract for Deeds- Rapid Home Deals 352-480-0955
Speaker 1:
Good morning. It’s Friday once again. It’s time for Fan Mail Friday. Our seller this week has an interesting situation. She bought a house under a contract for deed last year, and now she finds that she needs to move out of state and wants to sell the property. The problem is she doesn’t own it. It’s never been titled in her name. Let’s talk about that a little bit.

All right. You may have heard the term before, but what exactly is a contract for deed or an agreement for deed? You might have also heard it called seller financing, owner financing, or installment sale. You may also have heard it called a land contract. This is an agreement where a seller provides owner financing to a buyer. In turn, it allows the buyer to make monthly payments to the seller instead of a bank. The seller will transfer the property title once the property is paid in full, according to the terms of the contract.

Is an agreement for deed or contract for deed a mortgage? Under Florida statute 697.01, it defines a mortgage as all conveyances writings for conveying selling property for the purpose or to secure the payment of money shall be deemed and hailed mortgages. Since a contract for deed is an agreement that the seller makes to the buyer to transfer the property once a specified amount of money has been received, it is considered a mortgage under Florida law. What are the legal consequences for an agreement for deed or a contract for deed?

Well, for the buyers, that means a buyer can take possession of the property. They can move into the property. They can live on the property. They can rent the property just the same as if they owned it. For the sellers, this means the seller keeps the title to the property, which means if the buyer does not pay under the terms of the contract for deed, they do not have to foreclose. They can only come back and repossess the property.

Now, should you buy a property under a contract for deed or an agreement for deed? Well, there’s several different pros and cons to this. On the pro side, you have negotiable terms. If you’re a buyer and you’re dealing with a bank to get financing to buy a piece of property, you have to kind of conform to what the bank’s requirements are. There really isn’t a whole lot of leeway there, and there’s really no negotiations involved. Under terms of a contract for deed or agreement for deed, it’s just you and the seller, and you can agree to whatever terms are agreeable to both parties. Since it’s not a lending company, you also may not have to… The buyer may not have to make a 20% down payment on a residential property. All right? It could be as low as zero if that’s what the buyer and the seller negotiate. Third thing is it’s a lot faster. Once the negotiation is done on what the terms will be for the sale, then it just automatically gets transferred, I mean the possession of the house gets transferred and the buyer can move in.

The cons to using an agreement for deed or contract for deed, the biggest one is a failure to record. If you don’t record the agreement at the courthouse, then you have an unscrupulous seller who very well, since they’re still holding title, could very well resell the property to someone else because you don’t have title. All right? Recording would put a cloud on the title and it would stop such an attempt. All right?

The other thing that I’ve seen from a different standpoint is I had to do a quiet title action on a property one time, because the person I was buying it from had purchased a property under a contract for deed and had actually paid it off years and years before, but no one had ever moved to retitle the property. If the original agreement had been recorded, that would have been seen in the courthouse records. It would have been a lot simpler to get this done instead of going through a quiet title action.

The other con is you’re going to pay higher interest rates than you would if you were going to a bank. I mean, today, interest rates are 2.82%. All right? In the case of my seller this week, who is trying to sell this house, she was paying 12%. That’s pretty high interest rates, but that’s the kind of thing that you can expect if you’re going into a contract for deed. That’s because the seller is taking all the risk, he’s not a big bank. He doesn’t have all these assets backing him up. Therefore, in order to be compensated for his risk, the interest rates are usually higher.

That’s our message for this week. As always, if you know someone who’s looking to sell their home quickly, have them call Rapid Home Deals at 352 480 0955, or go to our website, www.rapidhomedeals.com. We’ll see you next Friday.

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