Contracts For Deed Defaults

On Behalf of | Oct 16, 2013 | Estate Planning/Probate |

In a previous column Contracts for Deed (C4D), in the residential real estate setting, were discussed as an alternate method of financing the sale of real estate when traditional financing is not available. As was noted, the seller carries the financing pursuant to the terms of the C4D, and if the buyer complies with the payment terms, the seller gives the buyer a Warranty Deed for the property.However, when considering a C4D, a buyer should be aware of the consequences of a default. If the buyer is unable to pay the monthly payments due on the C4D or the payment in full no the maturity, or fails to pay, the real estate taxes or insurance, the buyer will be in default.Upon such a default, the seller is entitled to proceed with a cancellation of the C4D, and can do so immediately, without providing any “pre-cancellation” or other default notice.In the cancellation process, a notice of cancellation is prepared and served on the buyer, itemizing the defaults then in existence. The buyer then normally has 60 days from the date the notice of cancellation was served to bring the C4D current. To do so the buyer must pay a) the defaults listed in the cancellation notice, b) any payments that come due between the date the cancellation notice was served and when the default is cured by the buyer, c) costs of service of the cancellation notice, and d) in most cases, a portion of the attorney’s fees incurred by the seller in proceeding with the cancellation.If the buyer does not cure the defaults within the 60 day period the C4D is terminated. Upon such termination, the buyer no longer has ownership or other interest in the property, is required to vacate the property, and the seller is entitled to keep all of the money that the buyer had previously paid. Stop in or call us at (320) 763-3141.