A Contract for Deed in MN Enables Property Purchase Without a Mortgage
Buying property is often the largest transaction you will make in your lifetime, and it is usually financed through a third party in the form of a mortgage.
A contract for deed is a way to buy property in Minnesota without having to pay the full price upfront. It is an attractive option for people who—due to lower-income or a negative credit record—can not access a mortgage. It is also known as a land sale contract in other states.
We are experts at creating legal documents and helping you write contracts that protect your interests. DoNotPay can help you seal the deal on your dream property with all the info you need to set up a contract for deed in Minnesota.
What Is a Contract for Deed?
A contract for deed is an agreement to buy a property by paying in installments, with the seller providing finance for the deal.
In most property transactions, the buyer needs to pay the full purchase amount upfront before taking up residence, which usually means arranging a mortgage.
A Minnesota contract for deed allows the buyer to make a down payment and pay off the balance in monthly installments. The property remains the seller’s until the last payment has been made, but the purchaser can move into the property immediately and becomes the de-facto owner.
What Are the Benefits and Risks of a Contract for Deed?
As with any alternative financing option, there are both benefits and risks involved in a contract for deed in Minnesota.
It is crucial to understand the risks before entering into a contract for deed. The most important risks are as follows:
| Risk |
Explanation |
| Defaulting or non-payment | If the buyer misses a payment or fails to honor the terms of the contract, they risk losing the property and all the payments they have made to date. The seller is entitled to cancel the contract and begin eviction proceedings within 60 days in Minnesota |
| Costs | As the purchaser, you are responsible for the monthly installments but also for:
Failure to pay any of these could result in the seller canceling the contract |
| Mortgage and property liens | There is a risk that the seller could default on their mortgage repayments, leading to foreclosure. In this case, the buyer would lose the property and all payments made up to that point |
| Balloon payment | To keep the down payment and monthly installments as low as possible, the contract for deed may stipulate a final balloon—or lump sum—payment which may involve a large amount of money. If the buyer fails to make that payment on time, they could lose the property and all the money they have paid to date |
The benefits may outweigh the risks of a contract for deed, but awareness of the pitfalls of this financing method can help you avoid any difficulties.
What Should Be in a Contract for Deed?
To be watertight for both buyer and seller, a contract for deed in Minnesota needs to include the following elements:
- Full details of both parties
- Initial down payment
- Interest rate
- Monthly repayment amounts
- Term of contract
- Other terms and obligations
Full Details of Both Parties
The contract for deed should include the full names, addresses, and contact details of both parties.
Initial Down Payment
The buyer and seller should note the amount to be paid as an initial down payment on the property. This is subject to negotiation and will depend on the seller’s requirements and the buyer’s financial means.
Interest Rate
The contract for deed should record the interest rate for the property purchase, which is applied to the balance of the property price after the down payment has been made.
Monthly Repayment Amounts
The agreement should set out the exact amount of each monthly installment, as well as the final balloon payment if required. The buyer and seller should also agree on the date by which monthly repayments must be received by the seller.
Term of Contract
The contract for deed should include the length of the repayment term and the projected date of contract completion.
Other Terms and Obligations
This section should include stipulations on the following:
|
Contract Stipulation |
Explanation |
| Equitable title and legal title | The buyer acquires equitable title to the property as soon as the contract is signed and the down payment made, meaning that they become the de-facto owner. The seller retains the legal title until the contract is completed |
| Existing mortgage | If the seller still has an outstanding mortgage, the contract for deed should clarify this. Under Minnesota law, the buyer has the right to insist that the seller’s mortgage is paid off immediately |
| Recording | The contract for deed should be recorded with the county recorder or registrar within four months of its commencement |
| Breach or default | If the buyer defaults on payments or breaches any of the terms of the contract for deed, the seller has the right to cancel the contract, with the buyer forfeiting any payments made up to that point |
| Governance | The contract for deed should stipulate that Minnesota state law is the applicable jurisdiction |
A Minnesota Contract for Deed Process Explained
Here are the steps to securing a property under the terms of a contract for deed in Minnesota:
- Find a property that is offered for sale under a contract for deed
- Negotiate the terms with the seller
- Inspect the property to identify its “bought-as-seen” condition
- Sign the contract for deed
- Move into the property and take equitable ownership
- Record the contract for deed
- Make all the repayments on time
- Transfer the deed after the final repayment has been made
If both parties adhere to all these steps, the process should be simple and painless.
How Can DoNotPay Help With Legal Documents?
Using the guidelines above, you can draw up your own contract for deed, sign it with the other party and have it notarized to make it legally binding.
Legal documents can be daunting, so DoNotPay offers a series of contract templates and standard legal documents ready-made for you to use. You can by doing the following:
- in your web browser
- Enter the document you need in the search bar
- Fill out the details you want in the document
- Wait a short while for your legal document to be created
What Kind of Legal Documents Can DoNotPay Offer?
Our range of legal documents is growing all the time, and here are some examples of what we already have:
Property:
Business:
- Non-disclosure agreement
- Non-compete agreement
- Independent contractor agreement
- Bill of sale
- Operating agreement
Personal:
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