Original message
| Steve
  |  "Contract for Deed. What type of insurance?"
, Wed 27 Sep 21:41 
Hey everyone:
When I buy Contract for Deed what type of insurance do I buy? Doesn't the seller's insurance still cover him since his mortgage is still in place and he is still on the deed?
Steve
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Replies:
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| | Jackie
|  "Re(2):Contract for Deed. What type of insuran"
, Thu 28 Sep 22:31
Check out Bill Bronchick transcripts from the March 2 chat session Lease options vs. contract for deed -- thsi should clear up some of the confusion.
As for insurance.
you can just be named as additionally insured on the sellers policy - but I cancel the sellers policy and have the unearned insurance premium sent to me. If you do this, you'll need to get a Power of Attorney. Because any claim checks will come with both their name and yours. You don't want to be tracking them down 7 months after closing to sign a check for $3000 for a new roof -- they just mgiht get greedy.
I have my insurance company insure the property with a landlord policy which costs 1/2 as much as a homeowners policy - this is under my corporate liability unbrella policy. Then they contact the mortgage company and get an adjustment to the escrow so the monthly payments go down.
The disadvantage - I have to pay for that 1 year policy up front
the advantage - the check I get from the sellers insurance company usually covers it.
It's part of the docs my attorney has the seller sign at closing -- the cancel their insurance policy and assign the unearned premium to me.
Jackie
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| | Jackie
| "Re(2):Contract for Deed. What type of insuran" , Thu 28 Sep 10:26
Wow Terry,
That's interesting.
We need to get Bill on here to explain the reasoning for doing a contract for deed vs a lease option.
Jackie
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| | Terry (Houston)
| "Re(3):Contract for Deed. What type of insuran" , Thu 28 Sep 11:14
It was a very short email reply. I asked him about it when there were a lot of questions as to if you BUY in a contract for deed you do not have the 'control' that you do in a 'subject to' or L/O.
If you sell you do want to do a contract for deed because you can remove them quickly if you need to. Of course there was the post by Bill Bransetter that had the T/B filing bankruptcy and messing the whole situation up.
Course in Texas You can foreclose and evict pretty quickly as long as you follow the right steps. As you know more than I.
I also remember talking to Gregory at the Atlanta convention and he said the only way he sells is on a contract for deed because it allows him greater control if he has to remove a buyer.
I think it has something to do with being able to foreclose a lot easier than being able to evict, say on a L/O.
Here is a post from Rick Wheat on the subject. It may have more to do with your area than anything:
To answer Steve's question first, a Land Contract (Agreement for Deed, Contract for Deed, etc.) is a form of BUYING a property, (actually taking an ownership interest in it), with the Seller carrying the financing himself, but with the Seller keeping the actual title in his name until the financing terms are satisfied.
A Lease/Option is where the buyer Leases the property from the Seller, with an OPPORTUNITY to purchase it within an agreed upon time at an agreed upon price.
Now, to answer Tom's question. It depends on several factors, such as:
1. One of the main factors I look at is what my long term objectives are, and the risks involved with them. Lease/Options can be structured to make it easy for your buyer to ultimately purchase the property, or to make it difficult for them to purchase it. If you want to keep the property long term and just have occasional injections of option consideration, a Lease/Option is the way to go.
2. If the laws in your state allow you to recover possession of the property through a simple eviction procedure instead of a foreclosure, a Land Contract may be the thing to do.
And of course we maay all be confused now.
Terry (Houston)
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| | Jackie
| "Re(4):Contract for Deed. What type of insuran" , Thu 28 Sep 15:29
Terry,
Lease Option or Contract for Deed - we can have their behind on the street in less than 30 days in Texas
I did send Bill and e-mail and asked him to clarify it though.
Jackie
Jackie
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| | Terry (Houston)
| "Re(5):Contract for Deed. What type of insuran" , Thu 28 Sep 21:44
Here is an interesting post on the question we have been posting. I am by no means an expert (at all in any way shape or form as you know) so I would value the thoughts of yall on this since I have been taught to "Get the Deed" ;) :
Unfortunately, land sale contracts are NOT a great way to buy real estate: 1. Whether you live in a lien-theory state or a title-theory state, you do not have as many rights to the property you are buying if you buy on a land sale contract. This can mean possible problems in reselling, refinancing, or otherwise encumbering the property before it's paid off. Does one have the same rights to furniture they are buying on the installment plan from Schlock-A-Rent as they do to furniture they own? 2. The scenario: buyer finds a motivated seller. Seller insists on a land sale contract. It's been my experience (seen several hundred transactions) that if the buyer INSISTS on a land sale contract, it means "red flag," something may be wrong with property! Seller may be attempting to hide title problems or property may have liens against it seller doesn't wish to disclose. Can you get title insurance policy? Are signed seller documents held in collection escrow for future tranfer of deed when you pay off contract? 3. Some states allow specific remedies to foreclosure on land sale contracts, such as forfeiture (where you miss payments, you can be kicked out with no court appearance or chance to bring contract current. Little story: I was talking to a would-be buyer of one of my properties yesterday. He had just paid off a land sale contract on a bulding he bought several years ago. Now he wanted to buy mine, with me carrying the paper. Credit report showed he had a dozen old tax liens and judgements against him. Tax liens take first position! How did he buy property he just paid off with these liens against him? They were not disclosed to seller By the same token, you BUY on a land sale contract, there may be underlying problems not disclosed to you. This is one of the main rationales for a seller using a land sale contract in the first place. Seller says to himself, "Oh, I'll take care of these before buyer pays me off." What if you go to resell or refinance property and seller can't remove these in a timely fashion? Just one example. If other ways are available, it is just not a good idea to buy on a land sale contract unless you are a sophisticated professional. My thoughts. --Eduardo
Terry (Houston)
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| | Dealmaker
Moderator
|  "Re(6):Contract for Deed"
, Thu 28 Sep 22:29:
Terry:
In my opinion, that post makes too many generalizations and assumptions. It's like saying, "someone that wants to sell a house fast, should raise a red flag!" Yeah-right!
I do NOT agree with that post. I would definitely PREFER to buy Contract-for-Deed rather than Lease/Purchase any day.
There are several ways to secure your position when buying via Contract-for-Deed. Here are a few ways..
1) record the Contract
2) get a preformance mortgage from the seller
3) transfer property to a trust then buy contract for deed
4) transfer to trust then buy on a wrap-mortgage
5) Esrow the Deed
Dealmaker
[this message was edited by Dealmaker on Thu 28 Sep 22:47] |
| | lynnhahn
| "Re(8):Contract for Deed" , Fri 29 Sep 10:43
Okay, I'll throw in my two cents worth.
Lease-Option is a great way to get started in the business. We started out doing just L/O in the beginning until we were talking to Ron LeGrand one night and he asked why we don't just "Get the Deed". If you have ever met Ron you know that it was more like "Duh! Why don't you just get the deed". Since that night we started getting deeds. Since then we have done L/O, Subject-to, contract for deeds, flips, straight options, simultaneous closings, bought & sold notes etc.
There are so many directions that you can go with real estate investing. It's important for a beginner to focus on one or two techniques that fit their personality and resources. As you spend more time in the business you will come across opportunities that do not fit in with what you are currently doing, and this is the opportunity to learn a new technique and to add to your arsenal of tools. We still focus on the pretty house biz, but if we run across a great deal on an ugly one we know what to do with it.
When purchasing pretty houses on creative terms we prefer the following, in order of preference:
1) Give me the deed (subject-to)
2) Contract for deed
3) Lease purchase
4) Straight option (has to be great option price)
When selling on creative terms we sell 95% of ours on lease-purchase. In our state it is easier to get them out, although we have only done one eviction since we started in the biz. It is also more attractive on my corporate income taxes to sell on lease-purchase, as opposed to contract for deed. Taxes? is a serious consideration when putting your transactions together Never forget your silent partner the I.R.S.
I will consider selling on contract for deed when my buyer has at least 10% down.
Happy Investing!
Lynn 
Those who say it can't be done are usually interrupted by others doing it!
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