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Contract for deeds can be a dangerous proposition

When you're ready to buy a home, one option you have is to get a contract for deed offer. This kind of offer usually comes with an agreement that you must complete before you can purchase the home. The process itself is a financing agreement, and unlike getting a loan from a bank or financial institution, there are few protections. You must be careful to understand the fine print of these contracts, because if you make a mistake, you could find yourself out of your home and without the money you put into it.

A contract for deed essentially allows anyone to purchase a home without the need to have a mortgage. You would buy the home by paying the seller each month or as arranged in installments. The seller keeps the home's title until you pay off what you owe.

If you have no other option, it can be a good choice to go through with a purchase in this manner, but it is a high-risk option that should be a last resort for many people. Some offer homes that they know the buyer can't afford, and when the payments go into default, they are evicted and lose what they paid toward the purchase.

If you're considering a contract for deed, you may want to go over the contract with a legal professional before agreeing to anything. The fine print can hold many details that you'll want to understand before you sign and begin making payments toward the home you want to purchase. There could be time limits, requirements or other factors that you need to consider.

Source: Waseca County News, "Beware toxic transactions: Homebuyers urged to be careful about contract for deed offers," Suzy Rook, Dec. 19, 2016

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