In this day and financial times we all need options, choices, and new avenues to get where we need to go.
One of those in the realm of real estate is what is known in Louisiana as Bond for Deed. This is a contract to sell property in installment payments, transferring title after the price has been paid in full. All payments are made through an “escrow” company, who in turn makes the monthly payments to the creditor and issues IRS 1098 interest reports to the purchaser. They are also responsible for sending all required notices to the buyer and seller.
For a buyer with cash, but who may have some obstacle to purchasing conventionally, this is a viable, temporary means of getting the home of their dreams. Most contracts run 2-5 years until those obstacles are overcome and conditions have improved. They can also take the Homestead Exemption (as long as it is their primary residence), deduct the mortgage interest on their taxes (please check with your tax preparer for your particular circumstances) and may qualify for the Home Buyer Tax Credit currently available. As the buyer you are responsible for maintaining insurance, repairs, termite contracts and your monthly payments include principal, interest and a small fee to the escrow company.
And you are protected should the seller enter Bankruptcy or become deceased.
For the seller there are protections as well. The price is determined by negotiation (not just what the balance may be, if any), may earn interest on the payments (difference between what is sent to lender and the remainder to seller). Permission from lender is not required unless specified in mortgage language that Bond for Deed is prohibited. If buyer defaults, the cancellation process is simpler; often a “mutual cancellation” is signed and held by the Escrow company to use in lieu of a formal cancellation process. However, all payments made to the seller are forfeited, including the down payment). The seller is still responsible for all mortgage payments (usually one extra “cushion” payment is held by escrow company) and must notify the escrow company of any changes in payments due to changes in impounds account.
For the realtor, you may use of Standard Agreement to Purchase with an Addendum to modify for Bond for Deed (contact Choice Title for these forms) and the commissions are paid at the time of closing. Waiver of Redhibition is allowed and assignment of contracts is allowed.
There are extra costs involved and extra forms to be signed at closing for this type of transaction, but the benefits are extra to both buyer and seller. Contact Choice Title, Inc. at 225-744-4241 or 985-651-5241 for details and quotes.
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