Contract For Deed

This packet includes the following documents:

• Credit Application
• Contract for Deed,
• Seller's Disclosure of Financial Terms
• Seller's Disclosure Statement
• Quitclaim Deed
• Lead-Paint Disclosure Form
• EPA Lead-Paint Brochure

This packet is used by:
The Contract For Deed Package is used when you are sellng your home using owner-financing.
A Contract for Deed is also often referred to as a Land Contract or Installment Land
Contract. In a Contract for Deed (unlike the Wrap-Around Financing) the seller retains the
deed to the home and title remains in the seller's name until the purchase price is fully paid
and other terms of the agreement are met. The Contract for Deed contains less risk to the
seller than an owning-financing arrangement that requires the seller to transfer title
immediately.

The Documents:

Credit Application
The Credit Application is a crucial document for you to begin your due diligence into your
prospective buyer. The decision to finance someone's purchase of a home should be an
informed one.

Contract for Deed
The Contract for Deed is an owner-financing vehicle in which you sign a contract to sell the
deed to your property. A deed is the written document that transfers title (ownership) to
another person. Under a Contract for Deed, the deed is not conveyed to the buyer until the
buyer has paid the purchase price in full. With a contract for deed, a down payment is usually
made, then equal monthly installments are paid until either the purchase price is paid in full or
a balloon payment is required. For example, you may want to finance the buyer for five years,
but require a balloon payment at the end of the five years for the balance of the principal owed.
A Contract for Deed can be utilized by the seller whether or not there is underlying financing
that remains in place. The Contract for Deed specifies that the seller must make the payments
on the underlying mortgage, and if the seller does not, the buyer may do so directly and
subtract that amount from the amount owed to the seller.

Seller's Disclosure of Financial Terms
When selling your property on owner-financing, you must disclose the terms of the financing
separately for the buyer. This is sometimes called a "Truth in Lending" statement. Fill in
each blank carefully and completely. Carefully consider whether you want to permit or
penalize prepayment. If you are entering into a Contract for Deed to make a certain interest
rate on your money and get a certain return, you probably want a prepayment penalty. If you
anticipate selling your Contract for Deed to a note/mortgage buyer, a prepayment penalty will
probably make it more marketable. However, if you want to payoff your underlying mortgage
as soon as possible and you are not concerned about the issues identified above, you may not
want to discourage your buyer from paying early.

Seller's Disclosure Statement
When selling real property, sellers generally have to provide the buyer with a Seller's
Disclosure Form. The Contract for Deed indicates that the sale is "AS IS'' and requires the
buyer to make any inspection the buyer deems necessary. However, to the extent there is a
latent, material defect, you should disclose, the Disclosure Statement is prudent.

Quitclaim Deed
A quitclaim deed is a deed that does not warrant that the grantor has any particular interest,
but conveys whatever legal or equitable interest the grantor has. Some sellers in Contract for
Deed transactions require the buyer to execute a quitclaim deed from buyer to seller,
conveying whatever interest the buyer may have in the property back to seller. The quitclaim
deed is not recorded, but held in escrow. If and when the buyer defaults, and the escrow
company is properly notified of that default, it records the deed, helping to keep your title clear.
For the buyer's protection you may also execute, but not record, a warranty deed from the
seller to the buyer, and place that with the same escrow company to be recorded upon full
payment of the purchase price. We recommend using a local title company to hold, create and
record the deeds.

Lead-Paint Disclosure Form
Housing built before 1978 may contain lead-based paint. Lead from paint, paint chips, and
dust can pose health hazards if not managed properly. Lead exposure is especially harmful to
young children and pregnant women. Before renting pre-1978 housing, sellers must disclose
the presence of known lead-based paint and/or lead-based paint hazards in the dwelling. An
approved form has been provided in this package. The information should be carefully filled
out and the buyer given a copy. Keep a copy for your records.

EPA Lead Paint Brochure
In addition to the Lead-Paint Disclosure Form, owners of dwellngs built before 1978 must also
supply a federally-approved pamphlet on lead poisoning prevention. This Brochure is included
in this packet.