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Buying property on a Real Estate Contract

Buyer Real Property ContractsReal estate contract for purchase

  1. You do not have to qualify for a Real Estate Contract like you do with a conventional mortgage.
  2. With a Real Estate Contract, you don’t necessarily have to have a large down payment to close on the property. Your seller will likely want some sort of down payment, but it’s completely negotiable with the seller.
  3. If you have no credit or bad credit, an REC gives you the chance to show that you can make payments and eventually refinance and get a mortgage.
  4. Real Estate Contracts give more room to negotiate on the terms. Usually with a mortgage, the terms are set in stone, but with an REC, as long as both the buyer and seller agree, the terms can be modified however you want.
  5. Close contact with your lender. With a mortgage, you are usually paying your payments to a large company, which can make them very inaccessible. By actually knowing your lender by name, you can contact him/her with any problems that you have or make them aware of the situation, if your payment is going to be late for any reason.

Seller Realty Contracts

  1. Since the buyer does not have to qualify for the loan, the seller has access to a much larger market than someone who is only willing to sell for cash.
  2. Interest rates on Real Estate Contracts are often higher than the rates on conventional mortgages.
  3. You can use the interest income as an investment. For instance, if you are a retired couple who owns your property free and clear, you can sell the property on a Real Estate Contract. Instead of having a bunch of cash to try to invest or letting it sit in your bank earning you next to nothing, you could sell on an REC and earn 6-7% (or whatever interest rate that you and the buyer agree upon) on your money.
  4. Interest paid on the mortgage is a tax deduction(IRS.GOV Publication). Even though a third party is buying the property from the seller, the mortgage is still under the seller’s name. The seller will get to deduct the interest paid from his/her AGI.
  5. No judicial foreclosure on Real Estate Contracts. With a mortgage, the lender has to file for foreclosure, if the buyer is not making payments. With an REC, if payments are not being made, the seller can send a demand letter. If payment is still not made when the cure-default period ends, the seller may terminate the contract.


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Terry White

About Terry White

I started my business career after getting my degree in Accounting from the University of New Mexico in 1983. My first job was as a controller for a local title company, and in 1987 I started First Financial Escrow, Inc. Over the years I played a part in several startup companies including First Financial Equities, Inc., First Financial Trust, Inc., First Financial Marketing, Inc. and Asset Ventures, Inc. In 1997 First Financial Escrow, Inc. was able to purchase the escrow accounts from Sunwest Bank and changed its name to Sunwest Escrow. As the market changes, Sunwest has grown and changed along with it. Besides my wife, Sheila, we have three boys, two daughters-in-law, one grandson, another grandson on the way and a future daughter-in-law. Sunwest is my passion, and I enjoy coming to work every day to see what will happen next. I enjoy fly fishing, spending time in Colorado, biking and watching my boys play soccer.