Deeds

A contract for deed is typically used in transactions between private parties, where the seller, rather than a lending institution, is financing the purchase of the home for the buyer.  Typically, the contract requires the buyer make payments over time with interest payable on the unpaid balance.  After the deed is signed, the seller has legal possession of the property until the buyer repays the loan in full, usually through monthly installments.  This type of transaction can help encourage the sale of a home when the buyer cannot secure financing through a bank.  A contract for deed is recorded by the buyer with the country recorder where the property is located.  At Klun Law Firm, we can review the contract and explain any pending questions, making the transaction simpler.

Advantages and Disadvantages for the Buyer

A contract for deed is attractive to buyers who might not otherwise qualify for a loan due to lack of credit or a prior foreclosure.  Additionally, closing costs in a contract for deed is typically lower than a traditional mortgage since there are no applications or origination fees and the paperwork usually takes less time.  However, there are risks for a buyer in a contract for deed.  When a contract for deed is cancelled, the buyer loses the real estate, any money paid for improvements to the property and all money paid on the property to that point.  This can be especially difficult in contract for deed transactions involving farms and crops.  Also, the buyer does not become the owner of the property until payment is completed.  Until that date, the buyer only retains an equitable interest in the property.

Advantages and Disadvantages for the Seller

The advantage of a contract for deed to a seller is that the seller usually earns interest income on the property and retains legal title to the land.  However, a major disadvantage of doing a contract for deed is that the seller has to carry the financing themselves.  Additionally, the seller may need to offer credit terms to the buyer that a conventional lender may be unwilling to offer thereby increasing the potential sale price of a piece of property.  There is also a risk to the seller that the buyer may default and the seller may have to repossess the property.

Contrast with Mortgage.

 Like a mortgage, a contract for deed is a financing device which allows a buyer to purchase the property by borrowing funds from the seller who retains security in the property sold.  However, in a mortgage, a mortgagor-borrower obtains fee title at the outset and the mortgagee-lender has only a lien interest on the mortgagor's fee simple to secure repayment. In contrast, a contract vendor holds the fee simple legal title until paid in full.
Why must a contract for deed or other debt instrument contain an interest component?
The Internal Revenue Code recognizes the economic truth that a sum of money received today is worth more than the right to receive the same sum on some future date. A deferred payment transaction (such as a contract for deed sale) that does not contain an interest component fails to reflect the time value of money. Consequently, IRC Sections 1274 and 483 require that deferred payment transactions earn the seller a certain yield tied to rates periodically established by the Department of the Treasury.

A deed is a legal document that transfers the title of a property from one individual to another.  It contains the names of the old and new owners, a legal description of the property, and is signed by the person transferring the property.  A deed helps to protect the interest of both the buyers and sellers of a property.  A deed discloses any issues with the property, which helps to guarantee a reliable and fair agreement.   At Klun, we can help you through your next real estate transaction.  Call us today at 1-877-365-3221.

Warranty Deed
Generally, in Minnesota, title is transferred by a general warranty deed.  A general warranty deed provides the greatest protection to the purchaser because the seller pledges that he or she legally owns the property and that there are no outstanding liens, mortgages, or other encumbrances against it.  A warranty deed is also a guarantee of title, which means that the seller may be held liable for damages if the buyer discovers that the title is defective.

Quit Claim Deed
Another type of deed is a quit claim deed.  A quit claim deed transfers only the interest in a piece of real estate that the seller actually has.  A quitclaim deed gives the buyer the least protection of any deed. If the seller is the sole owner of the property, the quit claim deed is enough to transfer title, but the buyer takes a risk by accepting a quitclaim deed because it offers the buyer no guarantee that the title is valid. 
Quit claim deeds are frequently used when marketable title to the real estate is not of concern.  Common situations where a quitclaim deed is used include during the property settlement phase of a marriage dissolution to add or remove a spouse from title, real estate transfers between family members and transferring real estate to an LLC, corporation or trust.

Recording Deeds
The deed should be recorded in the county where the property is located.  Every county in Minnesota has their own formatting requirements for the recording of deed forms.  Owners and parties with real estate interests are required to file, in the county, all documents affecting their interest in property in order to give public notice of the interest.  Once a deed in recorded, everyone is on notice of the grantee’s interest in the property. 
Titles in Minnesota may be registered under the abstract system or the Torrens system.  Abstract records go back hundreds of years and an abstract of title is a record of all the entries for that property. Torrens or registered property is much simpler, more modern, and more efficient.  Instead of a thick abstract of title, Torrens property has a certificate of title.
When must spouses sign real estate documents?
The general rule, set forth in Minn. Stat. §507.02, is that the homestead may not be conveyed — again, regardless of whether the conveyance is of a fee interest or some lesser interest , such as a mortgage, life estate, etc. — unless signatures are given by both the owner and his or her spouse.  The common rule you will hear real estate agents and attorneys in Minnesota state: "One signature to buy, two signatures to sell." 

A deed is a legal document that transfers the title of a property from one individual to another. This document helps to protect the interest of the buyers and sellers of a property. A deed discloses any issues with the property, which helps to guarantee a reliable and fair agreement.  Klun Law Firm can help you through your next real estate transaction.  Call us today at 1-877-365-3221.

A deed is a written instrument that transfers the title of property from one person to another. There are many different types of deeds. Generally, in Minnesota, title is transferred by a general warranty deed. A general warranty deed provides the greatest protection to the purchaser because the seller pledges or warrants that he or she legally owns the property and that there are no outstanding liens, mortgages, or other encumbrances against it. A warranty deed is also a guaranty of title, which means that the seller may be held liable for damages if the buyer discovers that the title is defective. A warranty deed is no substitute for title insurance, however, as a warranty from a seller who later dies or goes bankrupt may have little value.

Another type of deed used is a quitclaim deed. A quitclaim deed relinquishes whatever interest, if any, the seller may have in the property to the buyer. A quitclaim deed gives the buyer the least protection of any deed. If the seller is the sole owner of the property, the quitclaim deed is enough to transfer title, but the buyer takes a risk by accepting a quitclaim deed because it offers the buyer no guarantee that the title is valid. Quitclaim deeds are used frequently during the property settlement phase of a marriage dissolution.

Recording

 In Minnesota, real estate records are kept in each county. Owners and parties with real estate interests are required to file, in the county, all documents affecting their interest in property in order to give public notice of the interest. Titles in Minnesota may be registered under the abstract system or the Torrens system. Abstract records go back hundreds of years and an abstract of title is a record of all the entries for that property. Torrens or registered property is much simpler, more modern, and more efficient. Instead of a thick abstract of title, Torrens property has a certificate of title.