Jim Scheller - ABR, SRS, e-Pro, GRI

It's been a while since we talked about I contracts for deed, and now the time has come to talk about the down payment you might need if you buy on a contract.

The things you need to keep in mind when buying a home on a contract for deed are the seller's costs and other interests. If the seller has his home listed with a Realtor, then he will owe his agent their commission. (Buying a home on a Contract for Deed is the same as buying it with any other financing.) That's a big one. So if you're buying a $150,000 house on a contract and the seller has an agreement to pay, say 5% commission, then you will need at least $7,500 to cover this cost.

The seller of any house will have other closing costs as well, but they will typically be minimal.

The other major interest the seller will have is the safety of his investment, namely, the house you're buying. He will want to know that you will take good care of it, and the way to show that is by putting money down. The more money you put down, the more you have invested, the greater the stake you have in the house, the better he'll feel. He doesn't want you to neglect the house or, worse, walk away from the contract.

So you'll have to come up with a substantial amount of money to buy a home on a contract for deed, just as you would if you were buying a home with normal financing. How much depends, of course, but I would not be surprised if the seller required seven, eight, or even ten percent down.

But don't forget: outside his costs to close (commission, etc.) everything is negotiable.

It turns out that where we are, in southern Minnesota, robins do over-winter. We are in a chunk of their range where robins stay put. Or maybe the robins we see in winter here came from somewhere up in Canada or Alaska, the northern parts of their summer range, while the robins we see in the summer took off south themselves when the days grew short.

I wonder if anyone has ever tagged robins with radio transmitters to answer that question? My robin research can only go so far, so don't count on me for that answer!

However, there is a cool site Cornell Lab of Ornithology has put together which seems pretty definitive about robins and North American birds in general: http://www.birds.cornell.edu/

All About Birds by the same folks seems like it would be especially useful for school aged kids (who tend to soak up all kinds of information) with an interest in birds. When my kids were little and we were homeschooling them, the internet wasn't as prominent as it is now. But if it had been, we would definitely have bookmarked this site.

If you have been checking on my blog for the last couple of weeks on my site www.MankatoHomesOnline.com, you will undoubtedly notice the fact that the look of my blog changed dramatically yesterday. That's because it's an RSS feed from activerain, a site for real estate professionals.

Before yesterday, I had only a vague idea of what an RSS feed is. I now know enough to be dangerous and to put it on my Mankato real estate site's blog page.

You can't make comments on my website, but you can come back to my blog on activerain to make any kind of comment you like there. I hope that if you find something helpful you'll let me know. Likewise if you take issue with something I've written. That's what makes life interesting, after all.

In the meantime, I wish you all well. Oh, and by the way, this RSS feed thing also has a cool feature: you can subscribe to my blog and get updates automatically. I would like you to do this. So if you are inclined, please take the critical step and head to my blog on activerain, look for the <Subscribe> button, and click it.

Many thanks.

You heard it here first, or maybe you heard about it from Karen the AZ Home Loan Lady like I did. In any case, this is worth passing along: there is a site out there with software that will allow you to create your own font that, theoretically, will look like your own handwriting! As a Realtor, I think it would be great to have my own font so I could type out an address on an envelope and have it look like I wrote it longhand.

(Marketing studies show people open envelopes addressed personally much more often than they do those that are not. They also will open envelopes written with blue ink more often than other colors too. That may be more than you care to know about how far marketing people will go to increase their chances to get their envelopes opened, but the lure of making money... In fact, I saved an article from somewhere about the 13 fallacies about marketing envelopes on my desktop. As a marketer, I actually found it very interesting! If you think you will too, email me and I'll send it to you.)

You download their form, write your letters in the boxes, upload the form, and you can preview the font before you buy it. If you like it, you hand over all of $9.00 and you can download it for your own use.

I see a potential problem with this idea: if you look carefully at all the "handwriting" fonts out there, you will see that the letters are crafted so that they join up when they are next to each other. I don't know about you, but my writing surely doesn't do that. Not in any way, shape, or form.

But if that doesn't deter you, here's the link: http://www.fontifier.com/signature.html

They just introduced a cool feature, though, that I might take advantage of: instead of uploading letters, you can upload your signature, pictures, sayings, greetings, or anything else you might like to add to an email, memo, or whatever to make it look more personal or folksy.

Now that's cool. You can do the same thing, by the way, if you have a notebook computer that allows you to write on it and assorted software to create a jpeg, which is what I've done for my own signature, but if you don't have the notebook and the Adobe Acrobat and Photoshop or whatever, for nine bucks you can't beat it.

Nobody profits monetarily from recommending Fontifier except the Fontifier people. Just so you know.

Time to cover another important number, but first a regression to yesterday's topic.

As I said in part two of this series on contracts for deed, as the Seller of some fine Mankato real estate, I wouldn't go for anything but a standard 30 year amortization schedule with a two or three year balloon unless there were special circumstances. But that doesn't mean you, as the Buyer, shouldn't make the attempt to negotiate the terms. There are no rules that state that a contract for deed needs to be written this way or that way. The thing about contracts is that they basically commit to paper what two people or two parties have agreed about. It's conceivable you could buy a home on a contract and have the entire amount of your monthly payment go towards the house and not pay any interest at all! It would probably take some serious convincing on your part, or you might just be in the right place at the right time to find someone who is feeling extremely generous to buy from, or maybe you'll buy from someone who should have spoken to their lawyer or financial planner before agreeing to your terms, or maybe you're buying from your mother. But that is life. If you get a good deal, I'm not the one to say you shouldn't take it. You have to be able to sleep at night, though, so think it through.

Now, having said that, we can get on to the topic at hand: the interest rate on your loan.

We'll now assume that you, as the Buyer, will be paying me, the Seller, according to a 30 year amortization schedule with a three year balloon payment at the end. I want the interest rate on my loan to you to be higher than the going rates for a regular bank loan for a couple of reasons:

· I'm not a bank, and I don't have systems set up to deal with losses associated with problem properties. I just have me and my bank account. That means that I will want to see more cash flow to allow me to protect myself if you should begin, for whatever reason, to stop paying your monthly payment. Banks have lots of money; I don't, so I want to have more in case of emergencies.

· If you're paying a comparatively high interest rate to me, it will encourage you to refinance with a bank or other lender to pay a lower interest rate. And when you do, I'll be out of the deal.

Normally, I will want you to pay anywhere up to 3% more on our contract. (But that's negotiable. Sound familiar?) 3% plus the going rate these days (5%) equals 8%, but you talk me down and we agree on 7.5%.

Next time: Down payments.