Selling a house on contract is an alternative way to sell a house, and this method can be a good financial move in many cases. Before you rush into, though, you should seek advice from a real estate lawyer. The lawyer is likely to talk to you about the following three things before you go through with this, and these are all important things to know.
The risks you take with this
The first thing to understand is what selling a house on contract involves. Selling a house on contract involves someone buying your house, but instead of getting a loan to buy it, you keep your loan and the buyer pays you monthly payments. The buyer will be completely responsible for maintaining the house and paying the expenses, and you must keep the loan during this time. When this arrangement is used, the buyer must typically get a loan within five years, and the actual sale of the house will go through at that point.
When you sell a house like this, there are risks you should be aware of. This arrangement involves you acting as the lender, and the buyer becomes the homeowner. The buyer moves into the house and must care for it like it was his own. The problem is that this does not always happen. Some people do not take care of their homes like you might, and this is a risk of selling on contract.
Another risk is that the buyer may not make his or her payments on time. If this happens, you may find it difficult to collect the payments and pay the mortgage you have on the house. If this problem continues, you may be forced to foreclose on the house, and this is not something that happens overnight.
The benefits you have with this
There are also some key benefits of selling a house on contract. One is that you might be able to make some money on the deal. To start, the buyer will have to put a down payment on the house, and you will most likely be able to keep this money if have to foreclose on the deal. A second way you can make money is through the interest. When you sell the house on contract, you get to determine the interest rate the person pays, and you can charge a higher rate than what your current mortgage is on the house.
The terms you should include
A real estate attorney will help you determine the terms for the deal, and the terms will include the selling price, amount of the payments, the interest rate, the length of the deal, and late payment fees.
Selling a house on contract is quite different from selling a house outright, and it can be a great option for some situations. If you have questions about this and would like to learn more about the risks and benefits, schedule a visit with a real estate attorney, such as Adamek J David, in your town.