1. What are the principle differences between an all-inclusive trust deed, a lease option, and a Contract for Deed?

A: (one part) Record Title remains vested with the seller under a lease option and a Contract for Deed

2. What is the cost and time frame associated with an eviction?

A:  The eviction process in Utah can be completed in around a month.  One should plan on spending about $500 in attorney fees plus court costs.

3. What is the cost and time frame associated with a foreclosure?  A: The foreclosure process takes 4 months in the state of Utah.  The process begins with the filing of the notice of default.  After the notice of default if filed, there is a statutory 90 day waiting period, followed by three weeks of consecutive publication.  Recently, a one month digital registry requirement was added to the sale publication process, thus the total time is now 4 months to complete a foreclosure.  The cost of a foreclosure is generally around $1,000.00 plus court and publication costs.

4. Is a Contract for Deed dissolved through the eviction process, or the foreclosure process?

A: Eviction process, subject to any deeds or instructions held in escrow

5. As a Realtor, what are the forms, flow of documents and language I should use when writing the

Contract for Deed?

A: First the standard Real Estate Purchase Contract is Used. Add the Seller Finance Addendum. Section 1 Choose “Other” then write in the line Contract for Deed / UREC.

6. Can you write a Contract for Deed over an FHA, or VA loan?

A: Yes

7. Which type of underlying mortgage will not work for any type of seller financing?

A: Utah Housing, and most likely other state’s bond-issued mortgages

8. How are Contract for Deed sales reported on the Multiple Listing Service?  A: Contract for Deed transactions constitute a sale and can be used as a comparable for future transactions.

9. Is Contract for Deed limited to owner occupants, or could it be used for investment property?

A: Contract for Deed is an excellent vehicle for acquiring investment property

10. Is Contract for Deed limited to residential property, or could it be used for commercial property?

A: Contract for Deed can be used to acquire any type of real property, including land, building lots, industrial or commercial property.

11. Is a Contract for Deed sale permissible in a Section 1031, or Starker, tax-free exchange?

A: Yes

12. Is a Contract for Deed legal in all 50 states?

A: Yes, its use and application are explained in HUD Handbook 4155.1 On-line version Chapter 2, Section B, effective date March 10, 2010

13. How does a lender treat payments received by the seller who sold his property on a Contract for Deed?

A: Rental income


14. Can rental income received be used to offset the underlying mortgage in order to help the seller qualify

for a new mortgage loan?

A: There are three answers to this question. FHA, Conventional, and most recently VA loans all have what are known as “buy and bail” provisions. #1, If the seller has sufficient equity in the property being vacated, along with sufficient cash reserves, then the rental income may be treated as effective income subject to the local vacancy rate factor. #2, If the seller does not meet those requirements then no rental income may be allowed, however, IF the buyer can qualify with both housing obligations, then the Contract for

Deed document set will satisfy the requirements to establish the home as a proposed rental property. #3 A 12-month seasoning process, with proof of payment, will establish the home as rental property regardless of the equity or cash reserve position and allow Contract for Deed payments to offset the mortgage obligation based on the lesser of, the local vacancy rate factor, or the actual income from operations filed on the borrower’s most recent federal tax return.

15. How do you decide whether to use a Contract for Deed vs an all-inclusive Trust Deed?

A: Either can be used at any time as long as all parties agree. However it is usually decided by the amount of down payment.

16. What is the difference between a Trust Deed and Note and an All-Inclusive Trust Deed and Note?

A: An All-Inclusive Trust Deed is used when there is an existing loan on the selling property. A Simple Trust Deed and Note is used when the selling property is Free and Clear.

17. Will Contract for Deed work on a “fixer-upper”?

A: Yes. In fact, Contract for Deed financing is a preferable alternative to an FHA 203(k) loan. Additionally, there are numerous instances where Contract for Deed financing can be used to substitute the buyer’s normal 3.5% cash investment by having the buyer document the hard costs of home improvements. The buyer can provide cancelled checks and receipts as a dollar-for-dollar substitute for the 3.5% down payment. The improvement items are NOT limited to the repairs required by the FHA appraiser. They can

include cosmetic improvements like paint and carpet.

18. What is an appropriate scenario where Contract for Deed should be used?

A: 1) A buyer who has less than perfect credit, or no established credit profile. 2) A buyer who has excessive debt ratios. 3) A self-employed borrower who cannot document sufficient taxable income, or who

has not been self-employed for a long enough period 4) A buyer with unstable income or insufficient time on the job 5) A buyer who’s immigration status is pending 6) A buyer with a contingency on another financed property 7) A property that is not eligible for institutional financing 8) Etc. This list will grow as lender guidelines continue to tighten up

19. What is a scenario where Contract for Deed should not be used?

A: 1) A buyer who has NO MONEY