Posted by Jimbob on December 21, 1998 at 15:35:26:
First of all why do a contract for deed? Not worth the trouble, you’re better off doing a lease/option with $2,000 down or less. I would never give someone $5,000 down unless I get title to the property.
Also, why are you interested in investing in a property that will have a negative cash flow??? Where’s the deal? Unless it will substantially increase in value or you’re buying it for 70 cents on the dollar or better.
You mentioned the seller wanted 10% interest over 20 years, try to negotiate a lower interest rate and amortize it over 30 years with a 15 or 20 year balloon. Or better yet, offer the seller 8% the first year, 9% the second year, and 10% the third year, and have it fixed at 10% for the remainder of the loan. That way you can raise the rents, (assuming it will be a rental), in order to keep up with the rising interest rate.
If the seller insists on $5,000 down, you should insist that he carry a private contract instead of a contract for deed, unless there is an issue of the infamous due on sale clause but we won’t get into that again on here.
Just fyi, contract for deeds have not done any buyers I know any good, in fact a few people got burned by them, I dont know all the specifics.