Buying a house on contract can be a very quick way to get into home ownership whether you have good credit or not. Usually the Seller wants a substantial down payment and a higher than normal interest rate. The Seller acts as a "Bank" and their money is made via the sale and the accumulation of interest.
The sale is closed at the signing of the contract. I strongly recommend that you have a lawyer look over the contract and make sure that your interests are protected.
Ok sounds easy enough- right?
In many of the contract sales it is that simple, however remember that when you make your last payment it is the Seller's responsibility to provide you with a clear Title to the property.
Check out this scenario:
I sell you a house on contract. You pay me $5,000 down and $500 a month. This goes on for a few years and everyone is happy, at this point in time let us say you have given me over $30,000 towards the purchase of this home it is almost paid for and you decide to scrape up the final amount left and own the property free and clear. Most of the time this works out fine BUT it turns out that last year I got into some legal trouble and was sued for over $50,000. I lost the case and I don't have that kind of money lying around. The courts then placed a lien on any and all property that I own so now the house that you almost have paid for has a lien against it for my debt. I cant afford to pay the money so I can't give you a free and clear title.
This is a horrible predicament to be in and it is definitely not your fault- you made all your payments and followed the contract as it was written. I suppose you could sue me- but since I can't pay the original lawsuit how in the world could I pay yours??? Unfortunately this has happened to people.
Some Sellers know from the start that they can never produce a clear title and they are crooks looking to take advantage of someone. Others can have a clear title when they begin the contract and due to unforeseen circumstances (like a car wreck, or medical emergency) they can no longer produce that clear title.
When a Buyer uses a Bank for the loan then all this is taken care of at the time of closing- the old owner and any future debts would no longer be against the property.
I would always recommend that you try for a traditional loan before jumping into a private contract.
The sale is closed at the signing of the contract. I strongly recommend that you have a lawyer look over the contract and make sure that your interests are protected.
Ok sounds easy enough- right?
In many of the contract sales it is that simple, however remember that when you make your last payment it is the Seller's responsibility to provide you with a clear Title to the property.
Check out this scenario:
I sell you a house on contract. You pay me $5,000 down and $500 a month. This goes on for a few years and everyone is happy, at this point in time let us say you have given me over $30,000 towards the purchase of this home it is almost paid for and you decide to scrape up the final amount left and own the property free and clear. Most of the time this works out fine BUT it turns out that last year I got into some legal trouble and was sued for over $50,000. I lost the case and I don't have that kind of money lying around. The courts then placed a lien on any and all property that I own so now the house that you almost have paid for has a lien against it for my debt. I cant afford to pay the money so I can't give you a free and clear title.
This is a horrible predicament to be in and it is definitely not your fault- you made all your payments and followed the contract as it was written. I suppose you could sue me- but since I can't pay the original lawsuit how in the world could I pay yours??? Unfortunately this has happened to people.
Some Sellers know from the start that they can never produce a clear title and they are crooks looking to take advantage of someone. Others can have a clear title when they begin the contract and due to unforeseen circumstances (like a car wreck, or medical emergency) they can no longer produce that clear title.
When a Buyer uses a Bank for the loan then all this is taken care of at the time of closing- the old owner and any future debts would no longer be against the property.
I would always recommend that you try for a traditional loan before jumping into a private contract.
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