If you’re ready to be a home owner, but face barriers preventing you from obtaining a traditional mortgage, you may have considered buying a home on contract. Or perhaps you’re already renting a home you love, and your landlord wants to sell it to you. As a contract buyer, you take on different risks and gain different benefits from a buyer who borrows money from a bank. Before signing a contract, you should speak to an experienced attorney who can make sure your rights are protected now and in the future.
A real estate installment contract sale is seller-financed. Rather than paying a bank or mortgage company each month, you will pay the seller. As a contract buyer, you share ownership with the seller. You are both listed on title. Only when you pay off the contract in full will the seller deed the property to you.
Because you share ownership, any judgments, lawsuits, or tax debts that either of you owe can attach as a lien against the property, and must be paid off before selling the home again. Before you agree to purchase a house on contract, you should know about any debts of the seller. If the seller has a mortgage, you want to be sure you know how it will be paid.
Before buying, you should carefully review the real estate contract to understand your obligations. The contract must clearly state the amount of down payment, the monthly installment payments, how many payments before you can satisfy the contract and own the house outright. Another essential term is what happens if either you or your seller violate any terms and the contract is forfeited.
Make sure you know what happens if you can’t make the contract payments. Unlike renting, moving out isn’t enough to terminate the contract. The seller can forfeit the contract, or could sue you to make you pay the balance. You may lose your down payment and monthly payments you made while living at the home.
Buying your home on contract can be a great opportunity. But you need a solid written contract in order to protect your interests and the rights to your home. Call an attorney before signing any real estate contract, no matter how great the deal looks.