Contract for Deed questions

I have a rental townhouse and like to do a CD. The following are my questions.

  1. I still have mortgage on my rental property, is this CD ok with my lender? Could lender treat it as sale and invoke due-on-sale clause?

  2. If CD is ok, what happens if my buyer defaults on their real estate tax?

  3. If CD is on 30 yrs mortgage, does buyer have right to refinance with bank (their credits improve)?

I am really new to this CD stuff, any help or suggests are appreciated!

Howdy Novak:

A CD should not trigger a due on sale if it is less than 3 years and even then most lenders care less unless the payments are missed. I did 30 or so and when the lender found out because of BK they kept on collecting from me after the BK.

Contracts for Deed are all but illegal here in Texas, The laws are so strict that no one does them anymore as well as new laws re lease options.

If the buyer defaults they are in default. Nothing happens automatically. You may want to pay the taxes and get them to pay you back monthly or give them more time or like me and ignore t for a few years and really rack up the interest and penalties.

Buyer has right to refinance at any time and pay you and the bank off. You could put a penalty in your contract if you do not want it paid off early or if you have a prepayment penalty in your loan agreement.