posted October 23, 2003 08:46 PM            

Your goal is owner (seller) financing either through a lease option/purchase agreement or a land sale contract (contract for deed) where the seller retains title until certain requirements are met. The title does not change hands and therefore the bank who holds the mortgage on the property the seller is selling isn't tipped off the property is sold. If they find out, they are entitled to enforce the "due on sale" clause in the mortgage and you and the seller don't want that. No Realtors, Mortgage Brokers or Lenders are involved in these transactions. It's principal to principal. A straight buyer to seller agreement that is closed at a title company or real estate attorney's office and I would prefer to close these at an attorney's office. Sometimes, title companies contact the lender who holds the mortgage and they then enforce the "due on sale" clause.

You must protect yourself in these agreements by language in the agreement that obligates the seller to show you each months mortgage statement to prove he/she is continuing to make the payments from the money you are paying him/her. You should also have held at an attorney's office a deed fully executed by the seller in your favor for the time when you have paid the seller off and the title to the property can pass into your name under the terms of the agreement.

Further, you should have explicitly spelled out in the agreement what constitutes default on your part and negotiate as liberal terms as you can. For instance:

"The buyer may not be declared in default under this agreement until buyer is delinquent (2)? (3)? (4)? consecutive payments."

Proper notification procedures should also be spelled out as well as the address where payments are to be made and a receipt from seller delivered to you after each payment. Never, never, never pay in cash. Always by check and make sure the check says what it's for and what month and year the payment is for. For instance: Mortgage payment 12134 5th Ave, June 2004.

Here are 2 sites that speak briefly to contracts for deed.
http://www.uslegalforms.com/contractfordeed/pennsylvania-contract-for-deed.htm
http://www.legalwiz.com/articles/lovscfd.htm

You might also want to do a search and type in "wrap around mortgage". This is an actual mortgage with the seller holding the mortgage and differs from a contract for deed in some ways that may be more useful in some real estate transactions.

posted October 24, 2003 01:48 AM            

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