Posted by Stacy (AZ) on October 02, 2000 at 15:43:29:
I’ll double check with my attorney about any recent changes for AZ.
Thanks-
Stacy
contract for deed - Posted by Don Stephenson
Posted by Don Stephenson on September 28, 2000 at 16:46:34:
Can you tell me about contracts for deeds? I understand they are used in the U.S. (how much?) but here in Canada they are not. How are they used? when? Where? What are the benefits on both sides? Any downsides? How popular is this creative financing arrangement?
I am looking at a few car washes to purchase and want to structure the deals using a contract for deed.
Thanks for your help.
Don
Re: contract for deed - Posted by Ed Garcia
Posted by Ed Garcia on September 29, 2000 at 15:30:37:
Don,
CONTRACT FOR DEED,
As it’s name implies, the contract for deed is an agreement drawn up between two parties, the buyer-borrower (vendee) and the seller-lender (vendor). Under a real property sales contract, the lender remains the legal fee owner of the property, which is one major distinction between this form of financing instrument and the mortgage and deed of trust. Although the buyer agrees to pay the seller a specific price under certain terms and conditions, thereby gaining possession of the property, the buyer does not receive full legal title until the terms of the contract are met. This procedure provides the seller, who is financing the sale of the property, with added protection in case of the buyer’s default.
Because the land contract does not have a note accompanying it, all conditions of the sale are described in the contract form, including the purchase price and the terms of the loan. The contract specifies the buyer’s responsibilities to pay the payments when due, and taxes, and any special assessments or hazard insurance premiums. The contract also describes the deed that the seller will deliver to the buyer upon fulfillment of the contract or deposit with an escrow., if an escrow is used, to be held until the terms of the agreement have been met The delivery and subsequent recording of this deed serve as proof of the satisfaction of the contract debt.
The contract directs the buyer to take possession of the subject property and maintain such possession as long as the agreed-upon terms of the contract are met. In the event of a breach of contract, all payments made by the buyer are forfeited. The seller may then elect to bring an action against the buyer for SPECIFIC PERFORMANCE of the agreement or may choose to use any other legal remedies granted in the contract for recovery of the property and any losses incurred.
A real property sales contract is both a sale and financing agreement in one instrument: both the buyer and seller will sigh the document and have their signatures notarized in anticipation of recording.
Most frequently, the contract for deed from is used between individuals in the purchase and sale of real property when other means of financing are not readily available. Contracts for deed are usually junior financing instruments, established between a buyer and seller to close a particular sale when the buyer does not have sufficient cash or credit to secure a new senior mortgage or trust deed loan.
In the past, land contracts could be foreclosed in as few as 30 days under a strict forfeiture provision. This power of foreclosure was weakened considerably by " Barkis v.
Scott (34Cal. 2d 116; 208P. 2d 367), which held that California Civil Code Section 327.5 is a legal barrier to harsh and unreasonable foreclosure proceedings. As a result, foreclosures under a land contract must follow the rules under a mortgage, namely, Judicial foreclosure.
Don, if I were purchasing car washes, I would divide my purchase into two different agreements, one for the property, and the other for the carwash business and equipment.
The reason being, financing down the road. Also, you can sell one without the other. By the way, in most cases you are paying blue sky and good faith for the business, so see if you can keep that financing with the seller. It gives you more options down the road.
Ed Garcia
Re: Land Contracts: judicial forclosure? - Posted by Stacy (AZ)
Posted by Stacy (AZ) on October 02, 2000 at 14:22:53:
Hi Ed-
You wrote:
“In the past, land contracts could be foreclosed in as few as 30 days under a strict forfeiture provision. This power of foreclosure was weakened considerably by " Barkis v.
Scott (34Cal. 2d 116; 208P. 2d 367), which held that California Civil Code Section 327.5 is a legal barrier to harsh and unreasonable foreclosure proceedings. As a result, foreclosures under a land contract must follow the rules under a mortgage, namely, Judicial foreclosure.”
I’m hoping you meant that in California land contracts must go through judicial foreclosure. In Arizona, the statues still allow for a forfeiture, which as you stated, is quicker.
Did you mean California, or do I need to start worrying about my land contract sales in AZ?
Stacy
Re: Land Contracts: judicial forclosure? - Posted by Ed Garcia
Posted by Ed Garcia on October 02, 2000 at 14:40:35:
Hi Stacy,
No, I was reciting California civil code. I realize it can very from state to state. However it never hurts to check, because many states are making changes as we speak. The hot topic now is Predatory lending. In my post I specified California, realizing it could very from state to state.
Ed Garcia