What is a Contract For Deed ?

What is a MN Contract for deed?

Instead of purchasing a home with a mortgage, the buyer agrees to directly pay the seller in monthly installments. The buyer is able to occupy the home after the closing of the sale, but the seller still retains legal title to the property. Actual ownership passes to the buyer only after the final payment is made.  Buyer has Ownership rights in the property. They get tax benefits of ownership of the property. The buyer can get other tax benefits thru home ownership with a contract for deed. The Buyer also gets to write off the interest the same as a mortgage in Minnesota.

Balloon payment

As in a standard mortgage, a contract for deed typically has an agreed-upon price and payment schedule. But the payments are often not amortized evenly over a long period, meaning you will likely be required to make a large lump-sum “balloon payment” at a specific date to complete the purchase by covering the full balance due on the sale price. At that time, you will probably need to get a mortgage for the balloon payment. If you are unable to qualify for a mortgage or otherwise make the balloon payment when it is due, you will likely face cancellation of the contract and eviction. The Buyer has the right to sell the property and cash out if they choose to before the Balloon payment comes due. The length of the Contract for deed is usually 3-5 years on average.

Cancellation and eviction

If you miss just a single payment, or cannot make the balloon payment or do not fulfill any other provisions in the contract for deed, the seller can cancel the contract and begin an eviction action against you in just 60 days. You will lose the home and all the money you have already paid toward ownership of it.

Recording a Minnesota contract for deed

Within four months of signing the contract for deed, you must record it with the office of the county recorder or registrar of titles in the county in which the property is located. If you do not do so, you could face a fine. Recording the contract will also help prove your possession of the property and protect you from post-contract encumbrances placed on the property by the seller.


Why would a buyer want to buy a home on a Contract for deed?

Here are a few reasons.

  1. Tax benefits.
  2. Pride in owning a home verses renting.
  3. Build equity. The buyer can sell the home for more money than they bought the home for?
  4. Pets-no landlord telling you that you cant have a dog or make you pay more a month because you have one.
  5. Buyer has poor credit or lack of credit.
  6. Buyer cant get a mortgage due to relocation.
  7. length of job history.
  8. self employed.

They are a lot more reasons why buyers purchase their home on a contract for deed but these are some of the main reasons.



If you want to own a home we do it all contact us today..

Steve Vennemann

BoardWalk Premier Realty