What Is an Installment Contract for Sale of Real Estate?
There are dozens of ways to make money in real estate. Today I’m going to answer your question, “What is an installment contract for sale of real estate?”
You can do this. Hundreds before you have already followed this path.
I’m Ted Thomas, and for the past 30 years, I’ve been involved in tax liens and tax deed properties. In my early days of real estate, I started with single family homes which I rented to others. That business grew to purchasing 50- and 100-unit properties with investors.
When I discovered tax liens and tax deeds and realized the huge profit margins, I never looked back.
What is an installment contract for sale of real estate? I can tell you it’s very lucrative.
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Installment Sales Are Commonplace
How does an installment sale work? Installment sales are commonplace for automobiles and trucks. Big box stores like Home Depot and Lowes do major business in the area of installment sales for repair products. Homeowners purchase furniture and appliances, and they do that with installment sales.
What does installment sale mean in real estate? In traditional real estate, new and existing homes, which are sold by realtors and brokers, are usually installment sales. However, they use different terminology. These real estate professionals and title companies prefer to say 30-year mortgage or 30-year deed of trust.
Traditional lenders prefer to lend $100,000 or more because of the fees and points they earn on large loans. They prefer using titles like 30-year mortgage rather than installment loans.
Lending in Difficult Economies
For the uneducated, there is a whole other market for entrepreneurs that remains open in difficult economies. Economies rise and fall, and the real estate business rises and falls with mortgage lending.
In a down economy, this cycle causes the banks to restrict money and make fewer loans, and this restricts the real estate business.
However, you are about to learn you have no worries because installment loans, which are simply called a contract for sale, keep the market wide open for the little guy. This is a whole large group of loans.
Buyers With Low FICO Scores
What is an installment sales contract for real estate? To answer the question, let’s broaden our thought process.
It’s important to understand everyone in America does not qualify to borrow at a local bank or from the government.
For example, recently divorced couples may have poor credit. The bank not only calls it poor credit, they call it a low FICO score.
A low FICO score disqualifies thousands of would-be purchasers and may be created by a past bankruptcy, late payments, or failure to make payments for closure and divorce. I’m sure you’re getting the idea.
What is the Benefit of an Installment Sale to the Seller?
What is the benefit of an installment sale to the seller? There is a large market of unqualified buyers waiting and wanting to purchase and looking for flexible sellers who will take seller financing installment payments.
This group of buyers are desperate for loans and will pay higher than bank rates which allows sellers and other hard money lenders to be in business.
Property owners who are willing to create a simple installment contract with monthly installment payments are able to accept lower than normal down payments and create high interest loans.
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What is a Seller Financing Contract?
Who holds the title in an installment contract? The seller maintains control of the property title. The seller does not transfer the deed to the new owner until all the payments are collected on the contract.
What are installment contracts? Installment contracts, sometimes called a land contract and other times called a contract for deed, are nothing more than an installment sale.
Credit challenged buyers are searching for homes in safe neighborhoods with good schools. Sellers with less than pristine “new” homes have a market to sell their property.
What are the Profit Margins on Tax Defaulted Property?
Tax deed properties are sold at public auctions by the local county, and the prices are 60%, 70%, or 80% below the tax assessed value.
Savvy investors purchase for cash from the county and then resell to the public utilizing a contract installment sale.
Selling Real Estate Without the Middlemen
The seller makes money on the margin between the low price and the sale price, and additionally, makes money on the installment sale financing.
Buyers who are FICO challenged with poor credit are able to buy from sellers looking for a fast sale and an opportunity to make large profits.
The brilliance of this system is that there are no lengthy delays waiting for bank approvals.
No appraiser is required; no attorney is required. A title company can handle all the paperwork, and the sale can be accomplished on the hood of a car.
What Is an Installment Contract for Sale of Real Estate: Conclusion
An installment contract is a lucrative way for sellers to earn a profit on both the sale of the property and the seller financing while also helping credit-challenged buyers to purchase real estate.
It’s a win-win situation and a common way to sell property, and sell it quickly.
If you’d like to know more about bargain real estate investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
You can learn how to reap the huge rewards from tax lien and tax defaulted property investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!