Seller Financed Transactions are not Contract for Deed

Seller FinanceToxic or Not-

In several recent articles published, they authors talk of how seller financed transactions are “toxic”.

They then to into a long drawn out explaination of a contract for deed.  How investors are purchasing cheap houses and selling them via contract for deed and taking advantage of the buyer.

A contract for deed is basically a rental contract that says the renter is going to put some amount down and then make payments monthly for the time of the contract and once it is all paid off the buyer gets the home.  The author then goes on to state that if the homebuyer fails at any point in the trasaction, they can simply evict the home buyer and keep all their money . . . which could not be further from the truth.

Talk to any attorney about using a contract for deed or a lease option and they will tell you to stay away from the contract for deed because the buyer will be gaining an ownership interest in their home and if they fail in the contract they will need to be foreclosed on, just like a home owner, before you evict them.

So the investor can’t really prey on the poor homeowner.

Next, because of the new consumer protection laws that were designed to protect the consumer, true Seller Financing with a note and a deed of trust or a mortgage has all but stopped across the country because the new laws prohibit these transactions  So because the investor can no longer offer the better option of Seller Financing, they turn to the Contract for Deed transaction.

These articles tell the home buyer to avoid this Contract for Deed at all costs and to go apply for a mortgage with a traditional lender, but they fail to realize that the traditional lender will typically not lend on a home under $50,000.  So how do you buy a house if you can only afford a $45,000 house?

Well right now, you can buy it with a Contract for Deed and if the Seller Finance Coalition can get the rules changed, you may be able to buy with a Seller Finance Transaction.