I own a home in southwest missouri that I would like to sell to my brother. The home still has a mortgage on it that of course is in my name. He does not have the best credit, bad credit etc. He currently lives in the home and pays me exactly what the monthly payment is. I pay the insurance and taxes on the home. I still have a 20 year mortage on the home. Is a contract for deed the best way to make this selling transaction? Do I owe him any money if lets say…5 years from now he decides to move out or does he just lose the money he has paid on the home?
A contract for deed is the same as an installment sale, except you retain title in your name until the full amount of the contract has been paid.
If you sell to your brother on a contract for deed, then he gets all the rights and privileges of ownership to include the tax deductions and any equity he builds in the property. If he moves out before the contract is satisfied, he can sell the house and use the sale proceeds to pay off your contract.
In essence, if you sell on contract for deed, your brother is buying a property that you are financing.
If you have any doubts about your brother living up to the contract you may want to rethink selling him the property. I have seen a number of families torn apart from business dealings such as this. I hate to pour cold water on your deal and it will probably work out fine but think about it.
donrock