REAL ESTATE Q: A buyer has asked us if we would sell our property to them on a Contract for Deed. Would this be wise? Dick Phelps A: The answer depends on a lot of things; is it bare land, your principle residence, or a business. In a nutshell, the buyer is asking you to be "the mortgage holder" on the financing of the sale of your property. You remain the owner while the buyer makes payments to you. Whether or not you accept a Contract for Deed to finance your sale depends on whether you are comfortable with the situation. Here are some things to consider in making the decision. Since the buyer can walk away from the Contract for Deed, you need to consider their amount of "skin in the game" in the form of down payment to you. The more the buyer puts into the transaction, the better the chance they will not walk away. Typically, 10% or more is a good amount. Now if they can come up with 10% down, steer them to a hometown lender for financing. The buyer needs to pay interest on the money they have promised you. Typically the amount in a Contract for Deed is 1-2% above what banks are charging. This amount will encourage them to refinance at a lender for a better rate and cash you out. To determine monthly payment, that is negotiable. Get as high an amount as possible in monthly payments. Use an Amortization schedule easily available online to determine amount and payment schedule. There are many other considerations to include in the contract. If for example, there is timber on the land. Be sure to include a clause that restricts the buyer from harvesting timber prior to completion of the CD. Remember, if a buyer has materials delivered or work performed and does not pay for it, a lien can be placed on the property and if the buyer walks away, you now have added debt. Be sure to add language in the contract that requires the buyer to get permission for work or materials from you prior to do so and provide you with paid invoices for any work or materials prior to ordering more. Contract for Deed can work but having the buyer acquire financing at a local hometown lender and cashing out is better in most cases. Call me with any Real Estate questions or for a referral to one of our hometown lenders. Centuy. For Questions Contact: Dick Phelps 218-766-5263 rphelps@century21dickinson.com DICKINSON REALTORS REAL ESTATE Q: A buyer has asked us if we would sell our property to them on a Contract for Deed. Would this be wise? Dick Phelps A: The answer depends on a lot of things; is it bare land, your principle residence, or a business. In a nutshell, the buyer is asking you to be "the mortgage holder" on the financing of the sale of your property. You remain the owner while the buyer makes payments to you. Whether or not you accept a Contract for Deed to finance your sale depends on whether you are comfortable with the situation. Here are some things to consider in making the decision. Since the buyer can walk away from the Contract for Deed, you need to consider their amount of "skin in the game" in the form of down payment to you. The more the buyer puts into the transaction, the better the chance they will not walk away. Typically, 10% or more is a good amount. Now if they can come up with 10% down, steer them to a hometown lender for financing. The buyer needs to pay interest on the money they have promised you. Typically the amount in a Contract for Deed is 1-2% above what banks are charging. This amount will encourage them to refinance at a lender for a better rate and cash you out. To determine monthly payment, that is negotiable. Get as high an amount as possible in monthly payments. Use an Amortization schedule easily available online to determine amount and payment schedule. There are many other considerations to include in the contract. If for example, there is timber on the land. Be sure to include a clause that restricts the buyer from harvesting timber prior to completion of the CD. Remember, if a buyer has materials delivered or work performed and does not pay for it, a lien can be placed on the property and if the buyer walks away, you now have added debt. Be sure to add language in the contract that requires the buyer to get permission for work or materials from you prior to do so and provide you with paid invoices for any work or materials prior to ordering more. Contract for Deed can work but having the buyer acquire financing at a local hometown lender and cashing out is better in most cases. Call me with any Real Estate questions or for a referral to one of our hometown lenders. Centuy. For Questions Contact: Dick Phelps 218-766-5263 rphelps@century21dickinson.com DICKINSON REALTORS