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Follow on Google News | Homestead Road has good news for free and clear home ownersYou can get a low risk/high rate of return on the value of your home – from 5-10%. Or if you are selling your house, here is a way you can get a 5-10% return on the cash proceeds from the sale.
By: Homestead Road Homestead Road explains the option of selling the home on a contract for deed (CD), and thereby creating an income stream while earning anywhere from 5% to 10% on the money. If done carefully, it can yield higher rates of return at a lower risk than many other investments. How it Works The owner starts by engaging an attorney to draw up the contract for deed. To the person who buys the house, it feels like a mortgage in that there is a down payment and regular monthly payments for a specified period of time, usually 2-3 years. At the end there is a balloon payment that the occupant typically covers through more conventional financing. The 2-3 year period allows the buyer to establish or rebuild their credit to qualify for bank financing. The major difference between a mortgage and a CD is that with a CD, the owner retains the deed until the contract is fulfilled. Homestead Road, a leading house buying company headquartered in Minnesota has helped hundreds of owners sell their free and clear houses on contracts for deed. In many cases the company will make it even easier by actually buying the house from the Owner. Plus Factors A big advantage is that the owner will have no trouble finding a buyer and getting the asking price for the property. Prospective CD buyers are people who cannot get conventional bank financing and are grateful for this pathway to home ownership. They do not want to derail the deal with aggressive negotiations, so they are more agreeable to the asking price and the terms than conventional home buyers. That doesn’t mean they are bad credit risks. In fact a large percentage of them are actually good credit risks. For example, there are 25 million self-employed people, many of whom have more than enough income to maintain a monthly payment schedule, but they have a hard time proving it through the maze of today’s banking regulations. Millions of others are strong on their feet after a negative event, but not long enough to satisfy the underwriters. Again, the CD gives people time to establish or rebuild their credit through a record of on time monthly payments. A surplus can be built into the monthly payments that accumulate toward the mortgage down payment. In addition to having the pick of numerous credit worthy prospects, the owner has the further protection in retaining the deed. If the occupant is unable to maintain the payments, the deed holder can evict the occupant much easier than a landlord or mortgage holder. The contract should be written to specify that when the occupant is in breach of contract, they must vacate the premises. Another important advantage is the occupant’s mind set. Seeing themselves on a pathway to eventually own the home, they are more likely to take good care of the property than, for example, renters who often trash the premises. Summary Selling a house that is free and clear offers a number of opportunities to earn a higher rate of return at lower risk than many other investment options. A contract for deed makes it easier to get the asking price and to structure the contract in terms most favorable to the owner/seller. Millions of people seeking this pathway to home ownership have the income to maintain the monthly payments and are good credit risks. The owner is further protected by holding onto the deed, and having a hard asset - the property - backing the paper. End
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