A fee-for-service contract is a unique model for the purchase of a home often considered by buyers who cannot qualify for traditional financing or who have not saved enough money for a down payment. Make sure you can understand and cover all the costs you are responsible for. In addition to monthly payments to the seller, you must pay for homeowners` insurance, property taxes and repair and maintenance costs in accordance with the contract. Many contracts for note houses are sold „as it is“ and may need larger repairs that fall under your responsibility. Under the terms of the contract, you can lose the house if you don`t pay for repairs. After you and the seller have signed the deed contract in front of a notary, the seller must give you a copy with original signatures. You need this to „subscribe“ the contract for the deed with the county. That means the county has the information on the files. If you miss only one payment, if you cannot pay for the balloon, or if you do not fulfill other provisions of the contract for the deed, the seller can terminate the contract and file an eviction action against you in just 60 days. You will lose the house and all the money you have already paid for possession. In addition to the problems described above, there are no two identical contracts and, according to Cheryl Peterson of Twin Cities Habitat for Humanity, the terms of the agreement are often unclear.
The contract for the deed is usually a one- to five-page document that includes the amount of the purchase, the interest rate, the monthly payment and some word discussions in relation to the cancellation. Documents often do not contain any standard provisions for the start of the cancellation process. This lack of clarity in the contracts for the deed creates difficulties for financial advisors who advise buyers who have expired. Peterson says, „You can`t say, „If you`ve seen ten contracts for the deed, you`ve seen them all.“ That doesn`t make you an expert, because the next 10 will all be different. If on a contract for the deed the seller declares to be the lender and allow the buyer to pay for the property in installments rather than a package. The seller reserves a right until the buyer has dismantled the contractual terms. On that date, the seller still transfers the right to the buyer by deed. As a buyer in a contract for the deed, you are generally held responsible for home repairs. In this model, less disclosure of the quality of a property is needed, which could leave you with an expensive repair on your hands that you didn`t see coming.
To protect their interests in contracts, sellers and buyers must, so to speak, do their homework by ensuring that they learn and understand the specific provisions and risks of the contracts.