POSTED: Wednesday, May 16, 2012 - 7:00pm
UPDATED: Thursday, May 17, 2012 - 10:51am
EL PASO — At KTSM, we often get phone calls from people claiming to have been scammed by someone, or a business.
You've seen some of those cases in our Troubleshooters pieces. But now, we're dedicating a week to helping you tackle these sorts of problems-- we're calling it Deception Prevention Week.
Q & A INTERVIEW KTSM WEDNESDAY MAY 16, 2012
TOPIC: REAL ESTATE TRANSACTIONS
What are contracts for deed?
In a contract for deed, the seller, rather than a lending institution, finances the buyer's purchase of the property. The buyer takes immediate possession of the property and agrees to pay the purchase price of the property in monthly installment. The seller retains the legal title to the property until the last payment is made and the contract is fulfilled.
Why so many families are considering this type of arrangement when looking for a home?
Because of recent credit tightening, some homebuyers may be less likely to qualify for mortgages than they were just a few years ago.
The transaction is much faster and less costly to execute than a traditional, purchase-money mortgage.
The relative simplicity of the buying process appeals first-time homebuyers who lack experience in the market or individuals who are wary of traditional financial organizations.
What kinds of risks consumers run into when entering into this type of “For sale by Owner" arrangement?
High interest rates (Rates are unregulated)
Limited ownership rights and control over their properties
Short time period required to cancel the contract in the event of default.
Unexpected home repair costs because of the condition of property which was not disclosed in the contract
Seller retains title to the property during the life of the contract. (Seller can encumber the property with mortgages and liens).
Seller does not make monthly mortgage payments to the Bank which could lead to a foreclosure.
Seller may not have title to the property or the property may be encumbered.
What steps should I take to avoid becoming a victim of a real estate scam?
When entering into a contract, seek professional advice to make sure you understand all the terms of the contract.
Always make sure the contract for deed is recorded with the County.
If someone decides to “take over” the payments of a mortgage loan, make the payments directly to the bank, not the person who had physical possession of the property.