Thanks, Allan. Certainly some good points to consider.
We are fortunate in that we can easily afford the mortgage payments, as they,
along with the taxes, have continued to decrease as time goes on (we have an
ARM that is currently at 3.25%, I believe.) We could have locked the rate if
both of us had been employed throughout last year, which unfortunately was not
the case. Sad when you can afford the payments but won't qualify for the note...
As for the due on sale clause, it would be interesting to know, as our mortgage
holder is unique in that they have always held their own paper, so getting
approved with them was nothing sort of a financial military physical (those of
you who have had military physicals can understand my analogy.) This being
said, I would expect them to have such a provision in the mortgage - they are
*very* conservative - I'll have to pull it out of the safe and take a look.
When it comes to real estate transactions, we have ALWAYS employed an attorney
- it's very inexpensive insurance, and in many cases the mere presence of an
attorney on our end of the transaction has helped to speed things along when
otherwise they might have slowed the process had there not been one present, if
you know what I mean.
Again, thanks!
Dan
--- On Wed, 12/29/10, Allan Streib <str...@cs.indiana.edu> wrote:
> From: Allan Streib <str...@cs.indiana.edu>
> Subject: Re: [MBZ] Selling on Contract/Lease to Buy?
> To: "Mercedes Discussion List" <mercedes@okiebenz.com>
> Date: Wednesday, December 29, 2010, 3:00 PM
> I looked into it a few months
> ago. I'd suggest consulting with a real-estate
> attorney, but the gist of it is that the buyer gives you a
> small or no down-payment, and starts making payments on a
> standard amortization (principal and interest)
> schedule. If they default, you evict them and keep the
> payments they have made as rent. Otherwise the idea is
> that at some point they refinance into a conventional
> mortgage, and whatever principal they have already paid to
> you reduces the amount they need to finance.
>
> You would normally write the contract with a balloon
> payment after 3 - 5 years, so that you can get your equity
> out by some known date. Contract sales are a
> legitimate way to buy/sell real-estate, but I'd be inclined
> to have a lawyer set it up. It should be mostly
> boilerplate for a real-estate lawyer and not too expensive.
>
> If you yourself have a mortgage on the property, it gets
> more complicated. On almost all mortgages, a contract
> sale will trigger the "due-on-sale" clause, meaning the
> mortgage holder *could* call your mortgage. They might
> not, and probably wouldn't if the loan is in good standing
> and the rate is at or above the current prevailing
> rate. But you have that sword of damocles hanging over
> you.
>
> Allan
>
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