The Contract For Deed – A Great Way to Buy a Home


    With the economy in such a bad way you could find it hard to buy or sell property. Many private real estate investors are now looking into contract for deed sales. Both buyers and sellers of a real estate note need to assure themselves that the contract is of benefit to them and written correctly. Unorganized contracts can cause us a great deal of problems in years ahead, especially if you ever plan cash out that real estate note. That is why it’s essential that a seller and buyer really read all the clauses in their contract for deed, and make sure that everything is understood by both parties. Independent real estate investors advise you to hire a reputable real estate attorney to review your contract.

    Just what is a Contract for Deed?

    In Texas, or nationwide, a contract for deed assists the buyer in saving money when purchasing a home, money they can draw on for expenses resulting from the real estate purchase. This is when there is an agreement in place and the seller has the title until all the contract stipulations are met. In other words the seller holds the title and in most cases finances the home himself. The title becomes the buyer’s and the deed is registered once payment occurs and all conditions are met.

    In case of a real estate note a buyer is usually allowed to place a small down payment on the house. This means the buyers don’t have to have too much capital to purchase the home.

    If there is a Real Estate Note, what Becomes of the Monthly Payments? There are downsides to the Texas contract for deed even though in other regions of the United States real estate notes might first be seen as a blessing to the buyer. If a contract is written for a short amount of time, the interest rate on the principal will be greater, which will result in higher monthly payments. It is this reason because of which the buyer has to have enough cash flow for being able to pay the monthly payments.

    Benefits to the Seller: The advantages to those placing your notes for sale are numerous.

    First it is easier to sell the home in these difficult times. Secondly it allows the seller to report capital gains on taxes over the entire period of the contract instead of in just one year. This allows the seller to have substantial tax savings.

    If you are looking for a large sum of money at closing it is highly unlikely you will get it with this type of sale. This is probably not the right type of sale for you if you are looking for a large down payment vs the various tax benefits.

    It may be that the only way that the buyer and seller of a home can agree on a deal is through an instrument called a contract for deed. So both the parties can get benefited by this. Assure yourself that the contract is written correctly and of benefit to buyer and seller.

    Source by Kenneth Diesi