Real Estate Law

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Contract for Deed

A contract for deed, also known as a land contract, is a contractual agreement between the owner of real property and a person who wants to buy the property. Generally, the seller finances the sale and the buyer repays the loan in payments. With a contract for deed, the seller keeps the title of the property until the buyer repays the loan. Once the loan is repaid, the seller must release the property title to the buyer. Below are a few contract for deed questions that have been answered by Experts.

If a home is constructed on land that was purchased for deed, what happens if the house is foreclosed on before the land is paid off? My parents own the land but a grandchild bought the land with contract and took a mortgage to build the house.

Generally, a mortgage company wouldn't allow a mortgage for the purpose of building a home when the land is tied up in a purchase contract. There really isn't any way to determine the outcome of this situation. It is possible that the grandchild's equity would be the only thing affected by the mortgage. However, the grandchild's equity may not be affected at all. The outcome will depend on how the contract is written. If the bank attempts legal action against the grandchild, your parents will be added to the suit. At that time, they will need to hire an attorney to assist them in protecting their interest in the land.

I had a 3 year contract for deed with the option to extend. The owner never got back to me with paperwork for the extension. I have been living in the house for 5 years and paying every month, doing all repairs, keeping insurance on the house and now he is auctioning the house. Do I have any recourse?

Because you continued making payments on the home, you could validate an extension of the contract between the owner and yourself. It may be possible that the owner owes money to the bank and the bank has chosen to auction the home. You may want to check for any mortgages against the home. You can do this by going to the courthouse in the county that the home is located in. If there are no mortgages against the house, you could hire an attorney to possibly file an equitable lien against the home.

I signed a Contract for Deed with someone. Within a week he signed a Contract for Deed with someone else. They have made every payment directly to him and he is not paying the mortgage. What should I do?

If there is a mortgage on the property in question, legally, you cannot transfer the title. Before this can be done, you need to pay the mortgage off at the bank. Transfer of title while a mortgage is on the house is a fraudulent act against the bank. Your name is on the mortgage, so you are still the one who is responsible. You will have to evict whoever is in the home without permission.

As a buyer, how does one end a contract for deed in the state of Minnesota? The balloon payment was due on or before January 19, 2011 and the buyers were not able to get a loan. I sent an email to buyers given them some options to discuss and pursue (as they are friends). They responded that the letter contained misinformation and sought an attorney. What should I do?

Under law, you are required to notify the buyer that the contract expires when the balloon payment is due. It is possible that the buyer retained an attorney in an attempt to allow him more time to come up with the money or prolong their stay in the home. To avoid dealing with a real estate attorney, you may want to hire an attorney to represent your interest. If you are un- familiar with real estate law, an experienced attorney could exaggerate the issue while assisting his client, making a messy situation for you to deal with.

I signed a contract for deed in 2008. I was suppose to have ownership by Sep 2009. I was notified in Nov 2009 that we would close as soon as their lawyers release the closing documents. During this time, the mortgage lender foreclosed on the property. I put a lien against the property and the owner filed bankruptcy. Is my lien still valid?

A senior lien always trumps a junior lien. Your lien would be listed behind the deed of trust which means if the home forecloses; your lien will be erased and considered invalid. Your lien would be invalid if you were to file before foreclosure as well.

While you have no recourse as far as a lien is concerned, you can still seek a judgment against the seller of the home. A judgment is valid for up to ten years. This means that at any time during the ten years, you can attempt to collect from the person who "sold" the home.

Before locking yourself into a legal contract, you should always consider speaking with an Expert in real estate law.
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