Contract for deed agreements, like rent-to-own agreements, can provide certain buyers a way into home-ownership when a traditional mortgage is not an immediate option. Like rent-to-own agreements, though, contract for deed agreements do involve certain risks.
Some of these risks were highlighted earlier this year when the Consumer Financial Protection Bureau initiated an investigation into whether sellers are violating federal consumer protection laws. One of the factors that prompted the investigation is the fact that the popularity of contract for deed agreements has increased in the years following the foreclosure crisis, which resulted in reduced credit eligibility for many Americans and an influx of cheap homes on the market.
One of the unfortunate realities of contract for deed agreements is that they are an easy way for sellers to take advantage of vulnerable buyers. The same is true of rent-to-own agreements, which involve some of the same risks. Predatory selling is a significant risk that should be kept in mind. One of the big advantages of going the traditional mortgage route, for those who are able to do so, is that there are so many protections for consumers. These laws are in place to ensure that consumers have full and fair disclosures regarding real estate transactions and that lenders are not allowed to discriminate in mortgage lending.
Those who are looking to buy a home, whether through a traditional mortgage loan or especially through a contract for deed or rent-to-own arrangement, should always work with an experienced attorney to ensure they have guidance throughout the process. An experienced advocate will help guide a buyer through the process, ensure that the seller is abiding by federal and state law, and look out for the buyer’s interests in the transaction.