Selling a house on contract can be very beneficial to a homeowner, but there are also some risks with this type of deal. If you are about to sell your home to someone on contract, you will need to visit a real estate attorney for help drawing up the contract you will use. The attorney will make sure the contract includes all the necessary details and that it protects you, and here are three important details that must be included in the deal.
The sales price of the house
The sales price of your house is the first thing you will need to agree on with the buyer, and this amount should be added to the contract. The price you sell the house for will be used when amortizing the payments the buyer makes to you. Any principle the buyer pays during the contract deal will be deducted from the total price you sold the house for.
The terms of the deal
The terms of the deal include several important facts:
The interest rate the buyer will pay – You can choose any rate you would like, but the buyer will have to agree to it. Typically, you can charge a higher interest rate than the going rates in the mortgage industry, simply because you are keeping the loan in your name.
The amount of the payments – You must also agree on how much money the buyer will pay you each month for the mortgage payments. You should make sure this is significantly higher than the amount you currently pay for the mortgage payments on this house.
The length of time – Most contract deals last for only a certain length of time, such as five years. When the time frame ends, the buyer must refinance in his or her own name, and this will be the point in which you will finally pay off your mortgage on the house and transfer the deed to the buyer.
The down payment amount – The amount the buyer must put down on the house is another important term to include on the contract.
Your attorney will help you include other important details in the contract too.
The consequences the buyer has for defaulting on the contract
The contract should also clearly state what the consequences will be if the buyer defaults on the deal. Typically, defaulting on a contract deal will cause the buyer to have to move out of the house, and he or she will also forfeit the down payment made on the deal.
There are many other details that must also be included in the contract you use when selling a house through this method. To find out more about this, schedule an appointment with a real estate attorney in your city.