[PLEASE NOTE: Attorney John Pitrelli continues his series on what home buyers and sellers should know about practical legal matters in the current real estate environment.]
This is a follow up to my previous post about Owner Financing. The Contract for Deed has been frequently misunderstood and often maligned. The purpose of this post is to dispel some common myths about the Contract for Deed.
The following are false statements:
– A Contract for Deed is illegal.
– Contracts for Deed violate the due on sale clause in all Deeds of Trust and will result in a foreclosure of the loan.
– A Contract for Deed is not a final sale of the property.
– Real Estate commissions will not be paid until the Deed is actually recorded in the future.
– An Owner/Purchaser under a Contract for Deed has no greater rights with respect to the property than a general creditor of the Seller.
– A Contract for Deed should not be recorded in the land records.
– Selling or Buying under a Contact for Deed is no better then renting.
– The IRS will not recognize a Contract for Deed as a sale or allow the Purchaser to deduct interest and tax expense for home ownership.
– There must be an underlying loan to sell by Contract for Deed.
In my next post I will explore the advantages and disadvantages of the Contract for Deed.