Selling a house Bond for Deed

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big honcho title attorneys on the board

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I thought you were the "big honcho title attorney" on this board.

As I understand this was something very common in rural areas years and years ago, back when those folks didn't have access to banking. Like rmc, I'm not very familiar with its pros and cons, but it would raise a little red flag to me as to why the other party doesn't want to do a more conventional transaction. Is there some reason this guy really doesn't want to get a bank involved?

Do you currently have a mortgage on the house? If so, your mortgage has a clause that says they will not allow you to do this. If your current mortgage holder finds out they have a right to accelerate your current loan. That being said...I have done about three of these with no problems. These days lenders dont care as long as they are getting the monthly payment. Usually they find out cause the "buyers" payments go through a third party escrow company who makes the payments to your lender...the lender notices the checks coming from a third parties escrow account and they start asking questions or at lease in theory....like I said, I've never had a problem.

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viewed as a red flag because it probably means the buyer is not credit worthy

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Exactly the problem it appears. Credit that is.




After doing some internet research it also appears that I probably wouldn't be approved for the next loan anyway if I were to do this. Just guessing.

Sounds like a giant hell no.

Thanks for the quick and detailed info. Sounds too shaddy, risky, and not an option for us.

If you own the home F&C, it is basically rent-to-own. The buyer doesn't get ownership until the terms are met. Do you as the seller really care where the money comes from? Buyer can get money any way they need and will generally maintain the property because of the idea that eventually they will own it. That is why people do it, the buyer will treat the property better.

In a bad economy and loss of mortgage programs, many credit buyers will still want to own or rent a home. This makes this a good deal in the current enviornment.

If there is a mortgage, usually a FNMA/FHLMC mortgage won't allow a sale w/assumption because the new buyer is benefitting from your credit.

If the original owner buys a new property, it can be considered a primary residence if it is an upgrade in value, or other criteria such as an older owner downsizing, etc. It has to make sence. However, if trying to finance the new home, they will have to qualify with the debt and some primary homeowner purchase programs may not be eligible to them. You may be able to qualify with the rental but that has a lot of diffenrt requirements and usually at least two years of proof of rental (not sure of all the different program requirements).

If someone does this, take a minimum of 10% down payment, and always get paid with check or money order. This will allow for the new buyer to do a new loan as a refinance as opposed to a purchase, and can use an increasing appraised value after a year of payments and receive credit for those payments.

I would not use a 3rd party service unless moving out of the area, etc. Just treat the old property as a rental and if the person misses a payment, then instead of foreclosure, you just need to evict them and you can sell it again to another person.

In regards to the insurance on a bond for deed home....who is the named insured? The actual owner of the property or the person paying the bond for deed payments?

You can insure anything. The owner should have coverage, general liability, etc. The buyer could have a renter's policy or a homeowner's. I think you can insure anything, an agent may need to tell you if you can get homeowner's, but I have seen bond for deeds where the buyer has coverage.