buying a house on contract?

Question

My mother (who owns her house outright) is thinking of buying a smaller house down the street. In the meantime, the lovely couple next door who are now renting their house have expressed interest in buying it from my mom on contract. I am just confused as to the duration that this contract could be? Does this mean that they can basically draw up an agreement for 30 years like they would if they went through a bank for a certain amount of interest? Is it like a rent to own situation? My mom keeps the title until the house is paid off and if 10 years down the road, they decide to move...what happens to their money? Anyway, any insight into this kind of sale would be great. My mom doesn't need to sell her house to buy the other one and she thinks that this "contract" sale would be good as she would be getting interest every month?

Answer 1

The contract might be a good idea, but why not require them to put about 5-10% down and sell the house out right to this nice couple that lives next door.

Your mother can figure out if she want to carry the remainder for what ever period she want. Say for the sake of this argument your mother was willing to carry the mortgaqe note for 30 years she would write the mortgage note and 30/30 amortized for 30 years and all due and payable in 3o years. She can still amortize the mortgage for 30 years with a shorter due period. How long she want to carry the note is up to her.

If your mother and the lovely couple next door can come up with sales price and an amortized schedule along with the interest rate your mom want to carry she can write this down in a contract with everyone involved in the transaction signing this document called a sales contract.

This sale contract should have the current date, the sales price, the amount of down payment, followed byb the amount your mother will be taking bacrk as the mortgage note.


Place a date on this document as to what date everyone would like to have this transaction close. This is a target date so you might go over a little or close before this date.

Don't get hung up on what to write a contract on, just find some lined note book paper. The thing that make a contract is the signatures.

Look in the telephone book, find a tittle company, tell them you have a sale of property that you need to have an escrow closing agent complete. They will need a copy of the sales agreement you have drawn up. Take it to them or fax it to them

Based on this contract this company will draw up escrow closing documents that must be signed by all parties involved in the transaction.

There are other fees that might need to be paid, like who will pay for the escrow closing agent, title report and a few other inor things.

Your mother can foot the bill or it can be split down the middle.

The new buyer that lovely couple next door will have to pay the current taxes and also hazard insurance.

Since this is a purchase your mother will get from the escrow closing agent a note and deed of trust specifying the amount of money she has on the note, the interest rate, as well as the monthly payments.

This is a good dead for all concern. The lovely couple next door do not have to qualify for a loan. Your mother get a regular monthly mortgage payment for thirty (30) years or what ever time she decided to carry the note.

Now if the lovely couple next door who now has moved into your mother's house fail to make the regular monthly payment, your mother should foreclose on this lovely couple. She can do this by hiring a firm in your local area to do this type transaction. These company's are listed in your telephone book and are called Collectors or foreclosure services. If not call a title company for a referral of one that does foreclosures.

Some charge up front fees and some don't, either way these new charges are passed on to the lovely couple for not making their monthly payments on time. Your mother will get any money she have to expend to collect her mortgage payments. If not she will get the house back. She can sell it again the same way or rent it out.

The other thing that could happen is that after moving in and at some point the lovely couple refinance the house which would pay your mother off in one lump sum. This could happen at any time after the sale is complete. Your mother would have no choice in the matter, but what a windfall.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 2

In that case, you can certainly cancel your deal and get your earnest money back. Your proof is in the contract that you have already signed. It says that the deal is subject to a clean inspection for wood destroying insects as well as a number of other things such as quailfying for a mortgage, etc. Among other things, no lender is going to lend you the money if the house is infested with termites. Just provide a copy of the inspection report to the lender and they'll be happy to turn down your loan. This won't hurt your credit at all, by the way. I've gone through it more than once myself! Even if your contract doesn't mention these most courts would rule in your favor if you backed out of the deal since a prudent person would not buy a house that was infested with termites and could not be compelled to purchase home without the funds to do so. And if you don't have any kind of written contract at all, then the whole deal is null and void as real estate transactions MUST be in writing. Your real estate agent will probably be returning your check on Monday anyway, so don't worry about it!

Answer 3

It is similar to a loan from a bank only seller is the bank (think Monopoly) almost all the questions you ask have to be agreed between the buyer and the seller in the contract itself. The most common uses for these are people that do not have good credit want to get a house they buy it on contract and in a few years the get there credit together then get a normal loan.from a bank. There are benefits to both sides but since the normal basis is bad credit on the part of the buyer the deal is usually better for the seller (higher interest or higher risk of default in which case seller keeps all money paid up to that point). It is also possible for your mother to sell the contract to someone else at anytime for a discounted lump sum. In addition to the interest another benefit is getting a better (or sometimes full) asking price on the property. There are other risks to consider such as damage. Yes your mom keeps the title till paid. Yes you will need a lawyer.

Answer 4

The contract would state how much time they have to payoff her "loan". If they move and decide not to buy the property then she gets to keep the money so that would be nice. However, be careful because with all the lenders out there that can get people done, there is no reason for them to do a contract for deed unless they simply cannot get financed which means I wouldn't want to trust them to pay me every month. Good luck :-)

Answer 5

Tell your mother to get a lawyer to draw up the contract it doesn't sound right your mom would be stuck if they didn't pay.Good Luck

Answer 6

Just be very careful - consult an attorney

hope this helps
www.housebuz.com