Frequently Asked Questions on Contract for Deed in Los Angeles
Contract for Deed: An Alternative to Traditional Real Estate Loans2 min read
A contract for deed, or even a ‘land contract’ as it is sometimes called, is an alternative to a traditional loan for the purchase of real estate. It is especially attractive to buyers unable to get a mortgage due to credit or other reasons. This article will attempt to answer some of the more common questions relating to contracts for deed in Los Angeles.
What is a Contract for Deed?
A contract for deed is an agreement between a buyer and a seller. Under this agreement, the buyer makes payments over a period of time, usually set at anywhere from 3 to 5 years. The final payment will typically include one final principal payment followed by any interest that has accrued. Once all of the payments have been made, the seller deeds the real estate to the buyer without the need for a mortgage, title search or a closing.
Who are Eligible to Sign a Contract for Deed?
Essentially anyone who is legal age and of sound mind can enter into a contract for deed in Los Angeles. There are not a lot of restrictions or regulations in this area as it is a private agreement between parties, however there are several important considerations. Generally, people entering into a contract for deed are often unable to obtain a traditional loan due to credit or financial reasons.
What are the Buyer’s Obligations Under a Contract for Deed?
In nearly all contracts for deed, the buyer is required to make regular payments of principal and interest to the seller. The buyer also assumes the responsibility of all taxes on the property. It is important to note that throughout the period of the contract, the seller technically holds the title to the property. Therefore, the buyer will not have any legal right to the property until the final payment has been made and the deed to the property is transferred from the seller to the buyer.
What Should be Included in the Contract for Deed?
Generally, a contract for deed should include the following: the names of the buyer and seller, the legal address of the property, the purchase price of the property, the term of the loan, the amount of the regular payments, the amount of the final principal payment and the amount of interest, if any, that could be due. It should also include a default clause outlining the consequences should the buyer default, something that is particularly important if the seller still holds the title to the property.
Can There be Lawsuits Involving Contract for Deed?
Yes. Contract for deed agreements can be legally binding and therefore can give rise to the same sort of legal disputes that accompany any other contract, such as breach of contract or a failure to perform. Therefore, it is highly recommended that any persons entering into these agreements seek the assistance of legal counsel experienced in contract for deed to ensure that all legal requirements are met and that disputes are avoided.
Topics:
