Get a Rundown on a Contract for Deed Homes in Southern IL Now!

Standardized Legal Documents Get a Rundown on a Contract for Deed Homes in Southern IL Now!

Contract for Deed Homes in Southern IL Explained

Not all is lost if you don’t have the greatest credit record or enough money to secure a down payment to buy a house. Mortgage lenders may have denied you financing for your Little Egypt forever home, but there is another way—a contract for deed homes.

In this article, we will explain how a contract for deed homes in Southern IL works, what the benefits are, and what elements it should cover.


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What Is a Contract for Deed?

A contract for deed is a legal document that outlines the terms of a transaction between the buyer and seller of the property when the purchase relies on seller financing.

Also known as a land sales contract and installment sales contract, a contract for deed enables a buyer to purchase a property without applying for a mortgage loan. When both parties sign this legally binding document, the buyer is allowed to do repairs and some maintenance work on the property, but the legal ownership belongs to the seller until the last payment. After that, the title and ownership of the property are transferred to the buyer.

How Does a Contract for Deed Work When Buying a Home in Southern IL?

If you opt for a contract for deed when buying a home in Southern Illinois, here’s what you should expect from the process:

  1. The buyer and the seller of the property negotiate the terms
  2. The contract is drafted, signed by both parties, and notarized once they set all the details
  3. The down payment can vary from 10% to 20% of the total amount, and the interest rate can go 1–3% higher than the market rate—the buyer and seller should decide the exact percentages together
  4. The buyer pays the installments monthly
  5. The last installment is typically a balloon payment
  6. The seller immediately transfers the property’s title and ownership once the buyer pays the final installment

Contract for Deed Homes in Southern Illinois—Pros and Cons

Whether you’re the buyer or seller of the property, you should always check the advantages and downsides before opting for this agreement. The advantages include:

Party Pros
Buyer
  • You can buy a property even with poor credit and without enough money for a down payment
  • The closing costs are usually lower
  • You can take advantage of tax deductions
  • The down payments are typically lower than in a conventional loan
Seller
  • It expands the number of potential buyers
  • Tax savings may that come from selling the property in installments are a possibility
  • You keep the ownership of the property until the last payment as a security

Contracts for deed aren’t risk-free—you can find the downsides in the table below:

Party Cons
Buyer
  • You can’t make up the late payments because the seller has the right to foreclose after a missed installment
  • You can lose all you’ve paid until that point if the seller chooses a foreclosure
  • The payment plan is entirely up to the seller
Seller
  • You might have to wait years to transfer the title and ownership
  • The buyer may cause damages and then default
  • You might have to spend a lot of money on a lawsuit in case the buyer defaults

What Should Your Southern Illinois Contract for Deed Homes Cover?

A typical contract for deed should include the following elements:

  • Information about all parties—Names, addresses, and contact information of the seller and buyer
  • Description of the property—Address, location, description (as recorded in the deed), and external appearance
  • Inspection statement—A statement about the condition of the property
  • Purchase price—Full sale price, including costs and interests
  • Installment amounts—The amount of each installment, including the down payment and closing balloon payment
  • Number of installments—Predetermined number of monthly installments
  • Interest rate—The agreed-upon interest rate, usually fixed
  • Governing law—Legal consequences according to the Installment Sales Contract Act

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