Contracts for Deed- Proceed With Caution

With the housing market suffering and people struggling to pay their mortgages, there are a lot of people who have downsized their home and some who have even moved into apartments to try and reduce their cost of living. Many of these people have opted to retain their old home, with the mortgage in place, and then rent, or try to sell the home, on a Contract For Deed basis. But, there is a problem, under Oklahoma Law. In Oklahoma, a Contract for Deed is automatically treated as a Mortgage and Deed and requires proper recording of the instrument, payment of mortgage tax, and a full foreclosure process to terminate the agreement. Additionally, such an instrument almost certainly violates the underlying Promissory Note and Mortgage and can trigger acceleration of payment clauses.

Over the years I have seen many situations where individuals have sold the same property numerous times to different people on a Contract For Deed basis. Most people do not know their rights and believe that if they are buying property on a Contract For Deed basis, that if they miss a payment they can be kicked out immediately and lose all of the equity that they have paid towards the home. This is simply not the case. There are even situations where property is sold on a “Lease to Own” where such an agreement will be treated by the Courts as a Mortgage and Deed. If a person is “buying” property, whether it be a Contract For Deed, a Lease to Own or any other type of agreement whereby any amount of equity is being transferred in the property, from the seller to the buyer, most likely a Court will not allow a simple eviction (Forcible Entry and Detainer) but will require the seller to properly file the paperwork and proceed with a foreclosure. This treatment of the agreements by Oklahoma Law gives rise to homestead rights and additional requirements in order to proceed with a foreclosure.

Be cautious before trying to purchase or sell Real Estate by any means other than a direct purchase transaction which will include a Mortgage, Note and Deed.

Author: MidtownAttorneys

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