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Ask an Attorney: Selling Property

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I own several acres of property that I would like to sell. Should I sell the property with a contract for deed or a mortgage?

· Depends on the seller and buyers preferences.

· The goal of a contract for deed and mortgage are the same.

· The manner in which the goal is accomplished is different between the two.

Starting with a traditional mortgage, how does that work?

· Most people familiar with a mortgage.

· Involves a third-party lender.

· The lender finances and the buyer takes possession and pays back lender.

· Mortgage is a security interest.

· The contract for deed process, on the other hand, doesn't have this third-party.

So how does a contract for deed work?

· No third-party

· Involves the buyer and the seller with the seller financing the sale.

· Seller retains legal ownership until contract is paid in full.

· Buyer takes title to the property once the contract is paid in full.

Are there any advantages to having one over the other?

· There are pros and cons for both.

What are the pros and cons for a contract for deed over a mortgage?

· PROS: avoid mortgage formalities; benefits buyers who cannot obtain mortgage; more flexible.

· CONS: seller won't be receiving an immediate payment from a bank, so the seller won't receive the total price up front, but rather over time.

So there are some instances where a mortgage is a better option?

· Also enables buyer to obtain immediate legal possession.

· No equity in contract for deed.

· This can cause additional problems for individuals who may fall behind and default on their contract for deed.

So are different steps taken if the buyer defaults on a contract for deed compared to a mortgage?

· Contract for Deed: (1) statutory cancellation; and (2) court action.

· Mortgage: (1) statutory foreclosure.

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