I Want to Sell My Home But the Buyer Cannot Get Financing

CONCERNS WITH CONTRACTS FOR DEED / LAND INSTALLMENT CONTRACTS

As my mother told me long ago, “There is more than one way to skin a cat.” If we establish that saying as truth, and there are many ways to accomplish the same goal, I would have to add that some methods are certainly better than others given the same fact pattern; experience teaches us this. 

It is my experience that if you are selling a home in North Carolina to a buyer who does not have all of the funds to purchase the property, either thorough available cash or an institutional lender, seller financing a sale to a buyer is a better option for both parties than arranging a contract for deed.

Under a seller financing arrangement, the buyer purchases the property on a loan from the seller.  The buyer obtains title and is the record owner of the property subject the seller’s first mortgage lien against the property.  This arrangement allows the buyer to purchase the property with any or no available funds subject to the seller’s approval to take on this mortgage arrangement to receive payments over time.  In the event of buyer default, subject to the terms of the seller-financing note, the seller would have the right to foreclose on the property. 

Under a contract for deed arrangement, the seller of the property will retain ownership until the full purchase price of the property is paid.  The trouble we see under these arrangements is where there is a default.  Either the buyer is looking to leave the property and get their money back or the seller is looking to evict the buyer.  In this circumstance, the buyer often argues the money paid was an equity investment in the property that they want returned.  The seller argues the money paid was rent.  Unfortunately for the seller, the courts in North Carolina agree with the buyer that payments under a contract for deed arrangement are mortgage payments.  And, since there is usually no formal mortgage recorded, the seller is looking to go through a full judicial foreclosure to eliminate the interest the buyer has obtained in their property.  This has a result of being messy and costly.

If you are looking to sell your property and would like to discuss the benefits and risks of seller financing or trying to clean up after a contract for deed, we at Black, Slaughter & Black would be glad to help you.