Choice Title

BOND FOR DEED

A Bond for Deed is a Louisiana Contract to sell property in installment payments, transferring title after the price is paid in full. Payments must be made through an “escrow” agency, who makes monthly payments to the creditor, and issues IRS 1098 interest reports. The escrow agency is responsible for sending all required notices to buyer and seller.

SELLER

Seller can earn interest on payments made by the Buyer and sales price is not dependent on the mortgage balance owed to his Lender.

Permission of Seller’s mortgage company is not required unless the mortgage specifically prohibits a Bond for Deed transaction.

Seller is responsible for all payments to Mortgagee.

Seller must notify Escrow Agent if payments to Mortgagee change due to escrow shortages.

BUYER

Buyer can claim homestead exemption, even though no title has transferred, as long as it’s Buyer’s primary residence.

Buyer can claim IRS deduction on tax return with 1098 from Escrow Service.

Buyer is responsible for repairs/maintenance, insurance (including title insurance if chosen), termite inspections, etc.

Bond for Deed is a TEMPORARY bridge until more favorable conditions are available.

Buyer protected from Bankruptcy or death of the Seller.

Buyer may payout the contract at any time, no prepayment penalty, and is considered a refinance by a lender.

Buyer’s monthly payments shall include principal, interest, escrows for tax and insurance, and the Escrow Agent’s service fee (generally around $25).

DEFAULT/CANCELLATION

Cancellation of the Contract for non-payment is cheaper and faster than foreclosure.

If default occurs (i.e. buyer does not make payments), the contract can simply be cancelled. Often a “mutual cancellation” may be signed by the Buyer and Seller and used by the Escrow Agent in lieu of a formal cancellation process. All payments made to Seller (including down payment) are forfeited.

REAL ESTATE AGENTS

Realtors may use a Standard Agreement to Purchase with an Addendum to modify for Bond for Deed contract. Contact Choice Title for these forms. The real estate commission is paid at the time of closing. Waiver of Redhibition is allowed and these contracts are also assignable.