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Bond for deed - bad idea?
Posted on 6/18/15 at 3:27 pm
Posted on 6/18/15 at 3:27 pm
I am in the process of selling my home and I have a buyer who wants to do this. Has anyone had experience with this? Is it a bad idea? I am still waiting on the specifics of the deal.
This post was edited on 6/18/15 at 3:30 pm
8
Posted on 6/18/15 at 3:30 pm to cdl2006
Depends on your purpose? Are you the buyer or seller? What are the terms? Primary home? Investment property?
Posted on 6/18/15 at 3:35 pm to cdl2006
Why does the buyer want to do it? 99 percent of the time, the buyer can't get traditional financing. Why is that? If he had a short sale a year and a half ago and can get traditional financing in the next 12 months, and he makes a large downpayment, has cash, etc... it might not be terrible.
If he has no money and no credit, run away.
I have seen bond for deeds work in some circumstances very well for all involved, and I have seen it blow up also.
If he has no money and no credit, run away.
I have seen bond for deeds work in some circumstances very well for all involved, and I have seen it blow up also.
Posted on 6/18/15 at 3:44 pm to cdl2006
get a lawyer involved. worth the $250
Posted on 6/18/15 at 3:44 pm to RadTiger
I am selling my primary home. I am still waiting on the terms. Nothing is in writing yet, but I was told they would pay us full asking price. The couple wanting to buy is a younger couple who I would assume does not currently qualify for traditional financing. I do have it listed with a realtor and she should be able to answer a lot of the questions I have with it. I was just hoping to get some feedback from others who have had experience with these types of deals.
Posted on 6/18/15 at 3:46 pm to LSUFanHouston
To be quite honest, if you have low information on the seller end and/or low income/low down payment/bad credicks on the other it has an elevated probability of ending in tears.
Protect yourself and read through the agreement very carefully, and make sure you vet the heck out of this potential buyer. Verifications of Employment, Assets, etc. are perfectly reasonable and called for.
Don't offer this to a deadbeat. Do your homework. Make them put a chunk down and make sure you have your exit strategy clearly defined and easily accessed if things go pear-shaped.
Protect yourself and read through the agreement very carefully, and make sure you vet the heck out of this potential buyer. Verifications of Employment, Assets, etc. are perfectly reasonable and called for.
Don't offer this to a deadbeat. Do your homework. Make them put a chunk down and make sure you have your exit strategy clearly defined and easily accessed if things go pear-shaped.
This post was edited on 6/18/15 at 3:47 pm
Posted on 6/18/15 at 4:08 pm to GFunk
What would you consider a good chunk? 5%, 10%, or more? Any idea on what the general structure on these deals are? From what I read, they put down a certain amount that they forfeit if they do not go through with the purchase. They also make a monthly payment and a portion of it goes back to them along with their original deposit at the time the deal is closed. Is that pretty much how they work? As far as the current mortgage on the home, I am still the one that pays it, correct? I would not want to depend on someone else to pay a mortgage in my name.
Posted on 6/18/15 at 4:50 pm to cdl2006
quote:
realtor and she should be able to answer a lot of the questions I have with it
Please speak with a real estate attorney, as opposed to your real estate agent, to explain the risks involved in a bond for deed and how to best structure the agreement to protect your interests.
Many attorneys advise against bonds for deeds. Ultimately your decision will be determined by your risk tolerance.
This post was edited on 6/18/15 at 4:54 pm
Posted on 6/18/15 at 6:19 pm to cdl2006
It's a bad idea. Be patient and you'll get a qualified buyer.
Posted on 6/18/15 at 9:18 pm to cdl2006
I wouldn't do it
Posted on 6/18/15 at 9:19 pm to cdl2006
I bought my first house bond for deed. Wife and I were young and had some credit,but not enough. Put $15,000. down on a $65,000. dollar house. Three years later Metairie bank was able to lend us the money to pay off the bond for deed. The key to this working is they have to have a lot of money to put down or I would not consider. If the buyer has no skin in the game, it makes it very easy to just walk away just like they were renting from you. Think of a number that makes you say,I don't care if they walk away. My two cents, good luck.
Posted on 6/18/15 at 10:45 pm to TIGER2
I appreciate the input from everyone. I guess I will just wait to see what the details are and hope for another offer from a qualified buyer in the meantime.
Posted on 6/18/15 at 11:50 pm to cdl2006
If the bank is not willing to extend credit to the buyer, why should you? Sometimes there is a good answer to that question such as "I had no better option". Get a big enough down payment to make it worth your while.
Posted on 6/19/15 at 9:48 am to cdl2006
I'd want at least 20% CASH DOWN and an attorney proofed contract.
Posted on 6/19/15 at 12:37 pm to LSUFanHouston
quote:
Why does the buyer want to do it? 99 percent of the time, the buyer can't get traditional financing. Why is that? If he had a short sale a year and a half ago and can get traditional financing in the next 12 months, and he makes a large downpayment, has cash, etc... it might not be terrible.
If he has no money and no credit, run away.
I have done a few bond for deeds. The thing I find around here is there are people who make good money, like offshore or plant workers, but their credit is screwed because of a divorce. They usually have enough cash downpayment to make it worth it and understand they will have to pay some higher interest. I have a few still paying and have had a few refinance once they could and pay me off. I also had one I had to take back and that wasn't cheap.
Posted on 6/19/15 at 1:50 pm to stout
quote:
stout
quote:
I have done a few bond for deeds. The thing I find around here is there are people who make good money, like offshore or plant workers, but their credit is screwed because of a divorce. They usually have enough cash downpayment to make it worth it and understand they will have to pay some higher interest. I have a few still paying and have had a few refinance once they could and pay me off. I also had one I had to take back and that wasn't cheap.
If you write the contracts and agreements the right way the down payment and the first and last month's payment/deposit should be structured to help you cover any costs if you went through and planned for the worst case scenario before going through with it.
The thing is that bond for deed is incredibly one-sided. It's designed for an underbanked client, typically like you said a divorcee who can clear 6 figures that's proven time on the job working turn-arounds in the plant at 80 hours a week from December to April and steady time on the gig.
You just have to use the wording and terms to sharpen the teeth of the agreement up enough so that you come out even steven even in a situation where they walk away. Typically I see a lot of guys who do what you do simply take that first/last deposit and stick it in an account dedicated to that home. Like a contingency/emergency fund in case they walk away. Their up front comes from the down payment and then their milk money comes from subsequent monthly payments.
Posted on 6/19/15 at 2:04 pm to GFunk
You're telling me stuff I know but there's always potential for stuff you could never plan for. I structured it the same as I have ever done any deal in my life and it was correct. I learned from a friend of mine who has over 60 owner financed properties and he even wrote a how to book about financing deals.
The issue I had weren't just legal fees in dealing with that one. The fact that they put their mechanical sewer system across the property line onto the lot next door and I inherited that mess was not something I could have imagined in my wildest dreams. Surveys and thousands of dollars later to clean it up and it was a lesson learned but how could I have ever thought that would be an issue? It certainly was nothing insurance would cover and no down payment I had received the 3 years prior was going to fix it.
You can plan all you want, but who would ever think that they could inherit such a mess?
In short there is really no such thing as...
You can do your best to mitigate things but there is always potential for something to come and completely blindside you and no first or last months payment was going to cover what that fiasco costs me.
The issue I had weren't just legal fees in dealing with that one. The fact that they put their mechanical sewer system across the property line onto the lot next door and I inherited that mess was not something I could have imagined in my wildest dreams. Surveys and thousands of dollars later to clean it up and it was a lesson learned but how could I have ever thought that would be an issue? It certainly was nothing insurance would cover and no down payment I had received the 3 years prior was going to fix it.
You can plan all you want, but who would ever think that they could inherit such a mess?
In short there is really no such thing as...
quote:
and planned for the worst case scenario
You can do your best to mitigate things but there is always potential for something to come and completely blindside you and no first or last months payment was going to cover what that fiasco costs me.
This post was edited on 6/19/15 at 2:09 pm
Posted on 6/19/15 at 2:16 pm to stout
quote:
stout
quote:
The fact that they put their mechanical sewer system across the property line onto the lot next door and I inherited that mess was not something I could have imagined in my wildest dreams.
How in the heck did the sewer company get permits for the work without notifying the owners on title of EITHER property? May have been a headache and a bit of an extra-if not sizeable-added expense to do it, but that sewer company would've had to change the brand to "Stout's Acme Sewer Co".
Posted on 6/19/15 at 2:27 pm to GFunk
Guy that ran the sewer company passed away and the company died with him. The Parish inspector was no help because he's the one that passed it on the follow up to the install and he covered up as best as he could and then he also passed away in the middle of it all. My attorney told me it would be cheaper (and quicker obviously) to resolve it somehow instead of taking it to court. It was a nightmare. I finally had to buy a part of the lot next door, and being in the bind I was in, I had no room to negotiate.
Posted on 6/19/15 at 2:30 pm to stout
quote:
Guy that ran the sewer company passed away and the company died with him. The Parish inspector was no help because he's the one that passed it on the follow up to the install and he covered up as best as he could and then he also passed away in the middle of it all. My attorney told me it would be cheaper (and quicker obviously) to resolve it somehow instead of taking it to court. It was a nightmare. I finally had to buy a part of the lot next door, and being in the bind I was in, I had no room to negotiate.
Holy shite. What a crazy set of circumstances.
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