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KJL LAW, Arbitrator
Category: Real Estate Law
Satisfied Customers: 1605
Experience:  Attorney at Law Office of KJLLAW
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In the state of Pennsylvania, if a seller owner - finances s

Customer Question

In the state of Pennsylvania, if a seller owner - finances his home what is the better method forhim to use: purchase money mortgage or contract for deed?
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  KJL LAW replied 1 year ago.

Hello and welcome to Just Answer. No attorney-client relationship or privilege is formed by speaking to an expert on this site, the answers are for general information. By continuing, you confirm that you understand and agree to these terms.

A contract for deed is an agreement between the seller and buyer for the purchase of real property in which the payment of all or a portion of the selling price is deferred. The purchase price may be paid in installments over the period of the contract, with the balance due at maturity. When you r complete the required payments, the seller must deliver to you good legal title by way of a deed or assignment of lease. Under the terms of the contract for deed you are given possession of the property and equitable title to the property, while the seller holds legal title and continues to be primarily liable for payment of any underlying mortgage. This option is good if you do not qualify for a mortgage or will obtain a high interest rate.

A purchase money mortgage is usually given as part of your consideration for the purchase of real property, and delivered at the same time that the real property is transferred as a simultaneous part of the transaction. It can be given as any percentage of the loan but is usually issued in conjunction with and fill a gap between your down payment and a new first mortgage with a bank or a mortgage assumed from the seller. A disadvantage of a purchase money mortgage is that if you default under Pennsylvania, the holder of the mortgage, may obtain a deficiency judgment in a separate action after the foreclosure sale.

I hope this helps with your question.

Customer: replied 1 year ago.
Under which of these two owner financing methods would it be easier, quicker and cheaper to get them out of the property if they default for nonpayment of the loan?
Expert:  KJL LAW replied 1 year ago.

A contract for deed would be easier. If the buyer defaults on the contract you can give the notice required under the contract, keep the monies paid to date, and take back the property without a judicial foreclosure process, and evict the occupants. It is also much less costly.