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I live in Minnesota where the favorite kind of option is a ‘contract for deed’ or CD. I’ve talked to a bunch of sellers and they are all after a large down payment. Is there a good way to convince them not to take a down payment? Or at least wait to find one from a buyer? Are these people just not that motivated and I should move on, or is it worth pursuing? Thanks.
I kind of follow Jackie’s lead on this one. I want my down to mirror the upfront money I can get out of my tenant, optionee, or buyer which ever may apply. You can also counter with a higher sales price I lieu of down payment if your terms are good enough.
My guess is that your last thought is correct. These sellers just may not be motivated enough.
If you understand the process you could offer to sell a note that is created at close for more money up front.
An Option and a Contract for Deed are two completely different animals!
An Option just controls the property – YOU DO NOT BUY IT. You do not get possession. You do not get title.
A Contract for Deed is a way to get possession and ownership or the property even though you do not get clear title until the house is paid off.
Options have a lot less risks. You can walk away anytime. They are usually more short term. You do not exercise your Option until you find the buyer or tenant. You rarely put up more than $100 to secure an option. This of them like a listing agreement that a realtor has on a property.
Contract for Deeds have a lot more risks. You are bound, by the terms of the contract for deed, to make monthly payments, to pay taxes, pay insurance, to maintain the property, etc… and you may or may not be able to rent it or wrap the note.
Because you do not even have clear title with a Contract for Deed, you are taking on the risks that the seller could get the house tied up in a legal mess, or lose it to bankruptcy, sell to someone else, encumber it with additional loans, etc etc etc.
Contract for deeds are not a good way to buy a house. If you can’t get clear title then don’t do the deal. And of course, you should take title in a Land Trust.
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