If you're not familiar with the contract for deed house sale, it's also known as a land contract or land installment sale. You'll find minor variations to the contract for deed but generally it's an installment payment process where the seller holds the contract. With today's tough mortgage standards, the contract for deed is a good option for both the seller and the buyer.

A contract for deed enables the seller to obtain a better sales price and the buyer to become a homeowner when they can't qualify for a traditional mortgage. A draw back for the seller can be that it takes years to receive all of their money from the sale when they offer a contract for deed.

Contract for Deed - Structuring the Sale

Variations to contract for deed sales commonly occur in the terms and conditions of the contract. Rather than the boilerplate contract used by traditional lenders, almost anything can go into a contract for deed.

Contract for deed sales almost always have a balloon payment at a future date

The area of most interest to both seller and buyer is usually if and when a balloon payment becomes due. If the property is an investment property, the seller may offer to carry the contract for deed until the full purchase price is paid in 20 or 30 years. However, most sellers want their money sooner than that. A contract for deed may require the buyer to find alternative financing in as little as 2 years or it may be 10 years. Most contract for deed arrangements fall somewhere in between.

Circumstances of the buyer often have to be taken into account when determining the balloon payment of the contract for deed. If the buyer has a bankruptcy, the soonest they are likely to qualify for a traditional loan is not for at least seven years. Same thing for a foreclosure. However, a short sale might qualify in as little as two years.

Another issue of high interest to both the seller and buyer in a contract for deed is the interest rate. The seller is entitled to a higher interest rate than a traditional lender offers. With risk, comes reward. Buyers should expect to pay 8% and up as interest, although traditional rates are hovering at historical lows around 4%. This relatively high interest rate is something that can entice sellers to set the balloon payment farther in the future, so they collect the high interest rate for more time.

Contract for Deed - It's All in How the Contract is Written

Contract for deed arrangements favor the seller more than the buyer. As holder of the first mortgage, the seller retains the right to foreclose on the property if the buyer defaults. Unless the buyer completes the full terms of the contract they risk losing the property.

One thing the buyer is smart to insist be included in the contract is the requirement that the seller signed deed be held in escrow by a third party. This allows the deed to be recorded with the county in the event the seller cannot be found when the buyer completes their contract obligations. Also, the original deed for contract should be recorded with the county to put the world on notice that the buyer has an equity interest in the property.

An important clause for the seller to have included in the contract for deed is what happens if the buyer cannot obtain traditional financing when the balloon payment comes due. Laws vary from state to state but it can be difficult or impossible to foreclose on a buyer that is current with their payments but can't obtain a new loan required by the contract for deed. Besides, for most ethical investors, doing so would be morally wrong. The way most contract for deeds handle this is with a payment escalation clause. The interest rate can go up. Or the length on the mortgage can be shortened from 20 years to 15. Something changes when the balloon payment is missed to cause the buyer to pay more and motivate them to find traditional financing.

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One question that comes up early in lease option student training is how to get a lease when putting together a sandwich lease option deal. When you are trying to figure out how to get a lease, you need to start by looking for motivated sellers. Yesterday, I posted a bog about buying short sales. That's one of many ways to find motivated sellers. And there are many others.

In this blog, I'll answer the question how to get a lease by explaining how to use craigslist and scouring neighborhoods to find motivated sellers that you can bring into a sandwich lease deal.

How to Get a Lease Using Craigslist to Find Motivated Sellers

Craigslist has nine subcategories under the main category of Housing. When working at how to get a lease, you want to be active in 'apts / housing' and 'real estate for sale'. The apts / housing subcategory is where you find landlords advertising houses for rent. This isn't intuitive because you're looking for motivated sellers, but they exist in this subcategory. How to get a lease in this category involves looking for key words in the advertisement indicating the owner is having trouble finding tenants. Common indicators are words like 'rent reduced', 'no deposit required', 'second month free', etc.

When lease option students begin using this technique, a second question I often get is assuming they figure how to get a lease, how will they possibly rent it for more than the current owner is asking for? What you need to remember is with the lease option, you are going after a different audience. The second part of the sandwich lease are people that want to buy a house but can't qualify for a traditional loan. These are not people that want to rent - more about this in another blog. Right now we're concerned with how to get a lease.

The second category on craigslist is 'real estate for sale'. Discovering how to get a lease in this category involves the same technique, looking for key words in the advertising indicating they are motivated to sell. Words like 'price reduced', 'NEED TO MOVE', 'ALL OFFERS CONSIDERED', etc. Notice how some of the ad headlines are in all capital letters. These are people doing everything they can think of to grab your attention. The other clue you are looking for are owner financed houses. These people are more sophisticated sellers and will understand what you are trying to do with a sandwich lease.

The next step in how to get a lease is nothing more than starting to make phone calls to these people and explaining your proposition. However, there are many ways to find motivated seller when you are trying to figure out how to get a lease. Another is scouring neighborhoods for abandoned houses.

How to get a lease can be done by driving around looking for abandoned houses

How to Get a Lease Scouring Neighborhoods for Motivated Sellers

The picture I selected is a little over the top when it comes to learning how to get a lease by looking for abandoned houses but I wanted to grab your attention. How to get a lease for abandoned house is going to involve properties in better shape than this one. But you'll be looking for places needing minor repairs, the landscaping is in bad shape, and there are old notices tacked to the front door. Places that people can move into with minimal repair but that are clearly abandoned.

Once you find an abandoned house, the next step in how to get a lease is finding the owner. This is done by searching the public tax records. Most counties now have these online. You need to Google something like 'Oakland County tax records'.

I hope this blog helps you find a couple of more ways about how to get a lease that you can turn into a profitable sandwich lease.

Also, take advantage of my Free Book Offer and Video Training for finding motivated sellers and to help you find more ways about how to get a lease. There is valuable content in all of these resources I'm providing to you free. By taking advantage of them, your chances of learning the best ways of how to get a lease improve greatly.

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