Contract for deed

[Joyce Potts]

While it is true you have a meeting of the minds in a pending sale (which is why I give them more weight than listings) consideration has not been provided (is why I do not give them as much weight as a sale). A contract for deed, which are called "installment sale contracts" in many law books, has both (meeting of minds and consideration).

The buyer has rights of quite enjoyment of what ever ownership interest is purchased. The seller has rights to any consideration owed.

I'm not sure every contract for deed requires consideration to make it legal. Most real estate contracts (in Florida) are bi-lateral and don't require a binder to make it legal. Not sure about a CFD.

The buyer has rights of quiet enjoyment? Wouldn't he be a buyer in progress? The seller has rights to any consideration owed?

So if the 'buyer' pay 90% of what's owed?

Let me guess.

Like I said--it's great for the Seller/Owner.

 

[Pat Butler]

One way to think of a CFD is that the transaction consists of two components- One is the agreed upon sales price and the second are the financing terms which just happen to be extended terms. Not much different than if a buyer went to a lender and got a loan. With a CFD, the seller is essentialliy providing the financing; so you get the sales terms and a loan all provided by one party. Irrespective of the financing, the parties did agree to the other terms, and as such, could possibly be considered a good sale.

 

[Stephen J. Vertin MAI]

Irrespective of the financing, the parties did agree to the other terms, and as such, could possibly be considered a good sale.

Thank you Pat. Very well put.

Joyce:

I apologize for my inability to explain this clearly. Please be patient. Think of any sale regardless of what it is. There are two essential components. There is the item being sold (in this case real estate) and an amount of consideration ( in this case consideration is money). Simply put, goods are given for money or vice versa. Basic sales structure no matter what the item would you not agree?

The fact deeds transfer the title which is proof of ownership is unique to real estate. But if you think about it they have nothing to do with the basic structure of a sale (see above). They are simply legal documents showing ownership and ownership rights. Many deeds are held until final payment. There are literally millions of people in this country who will not receive a clear deed and title to their property until final payment is made (to whomever). This delayed deed transfer of title situation is not unique to CFD's. So why single it out and say because of it we cannot consider this a sale? The reasoning makes little sense to me.

Like I said--it's great for the Seller/Owner.

It can be. But it can also be advantageous to buyers. Think about buying a property in a market at its very bottom and five years later it is one of the hottest in the city. This has happened in Chicago more than once. The seller now hold a CFD that sold for $100,000 five years ago but currently produces an NOI of $150,000. Who is the winner now?

 

[Couch Potato]

Its a pending sale.

While it is true you have a meeting of the minds in a pending sale (which is why I give them more weight than listings) consideration has not been provided (is why I do not give them as much weight as a sale). A contract for deed, which are called "installment sale contracts" in many law books, has both (meeting of minds and consideration).

But not the full consideration. The deal is still in progress, pending. Generally some consideration is paid, in the form of earnest money, in all real estate transactions.

The buyer has rights of quite enjoyment of what ever ownership interest is purchased. The seller has rights to any consideration owed.

The buyer's rights are more similar to those of a tenant than those of an owner. Until the deed is recorded, the rights the buyer has to the property are governed by the contract, which serves as a "lease."

 

[Joyce Potts]

Thank you Pat. Very well put.

Joyce:

I apologize for my inability to explain this clearly. Please be patient. Think of any sale regardless of what it is. There are two essential components. There is the item being sold (in this case real estate) and an amount of consideration ( in this case consideration is money). Simply put, goods are given for money or vice versa. Basic sales structure no matter what the item would you not agree?

The fact deeds transfer the title which is proof of ownership is unique to real estate. But if you think about it they have nothing to do with the basic structure of a sale (see above). They are simply legal documents showing ownership and ownership rights. Many deeds are held until final payment. There are literally millions of people in this country who will not receive a clear deed and title to their property until final payment is made (to whomever). This delayed deed transfer of title situation is not unique to CFD's. So why single it out and say because of it we cannot consider this a sale? The reasoning makes little sense to me.

It can be. But it can also be advantageous to buyers. Think about buying a property in a market at its very bottom and five years later it is one of the hottest in the city. This has happened in Chicago more than once. The seller now hold a CFD that sold for $100,000 five years ago but currently produces an NOI of $150,000. Who is the winner now?

Sorry, but I simply don't agree that meets the definition of a 'sale'. My definition of a sale is transfer of ownership rights, usually for consideration. The CFD lacks the component of FULL, fee smiple ownership transfer, IMO. I understand that may be a few benefits I simply don't see where the benefits outweight the added risk. You illustration above is more than likely a rare exception and for income producing property.

As Greg points out, I think the Seller really has the same rights as a 'tenant'. Someone would have to argue long and hard that this qualifies as a 'sale' --at least in my book.

 

[Stephen J. Vertin MAI]

But not the full consideration. The deal is still in progress, pending.

Why because the buyer is making payments? In 99 percent of all sales the buyer is making payments.

The buyer's rights are more similar to those of a tenant than those of an owner. Until the deed is recorded, the rights the buyer has to the property are governed by the contract, which serves as a "lease."

It is not a lease. It is a sale. I have explained there are numerous deeds in trust that are not recorded. Literally millions.

My definition of a sale is transfer of ownership rights, usually for consideration. The CFD lacks the component of FULL, fee simple ownership transfer, IMO.

Then given your definition a CFD is a sale. Ownership rights have been transferred. The buyer now has the right to quit enjoyment (which is a fancy way of saying the right to use the property as he/she sees fit). The only component the CFD lacks is full fee simple ownership transfer. However, when you finance property through the bank you do not get full fee simple ownership transfer. The deed is either put in trust or a lien is filed. There is no full fee simple ownership transfer unless you pay cash. So where does that leave appraisers when searching for sales?

I understand that may be a few benefits I simply don't see where the benefits outweight the added risk.

If this is the case I recommend you never buy a property on CFD. Obviously many people disagree because these sales are done every day.

As Greg points out, I think the Seller really has the same rights as a 'tenant'.

A CFD is not a lease. If you use such logic all financed sales are leases because the same thing happens when payment are not made (eviction). I believe the lease argument a red herring. If it were a lease it would be called a lease.

Sorry, but I simply don't agree that meets the definition of a 'sale'

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You are sure welcome to believe what you wish and I will live with the above. This is my last comment on the subject since it seems to being going around in circles. Good luck.