What is a Contract for Deed and how does the program work?

Program & Timeline

The contract for deed program is designed to make the path to homeownership easy and straightforward, with a quick and efficient timeline that can take as little as 5 days from start to finish. Here's an overview of the four main steps in the process:

  1. Pre-Qualification: To get started, you'll need to get pre-qualified so we can notify you of available properties that meet your criteria. This step is free, has no obligation, and does NOT require a credit check. Simply provide us with some basic information about your desired property location, condition, available down-payment, and any other criteria, and we'll let you know which properties might be a good fit.
  2. Property Tour: Once you've been pre-qualified, we'll schedule a property tour so you can gather more information about the property and decide if it's the right fit for your goals. During the tour, we'll answer any questions you have about the property and the contract for deed program, and help you make an informed decision about whether to move forward.
  3. Secure Your Home: If you decide to move forward with a property, the next step is to submit a down payment, sign the contract for deed agreement, and transition the property utilities into your name.
  4. Move In: Complete the journey by moving into your new home! We'll quickly set a convenient move-in date, typically within days after finalizing the contract. On this day, you'll receive your keys and a welcome packet with essential property information, including warranty and maintenance tips. Our goal is to ensure a smooth and stress-free transition, allowing you to immediately start enjoying your new home.
What is a Contract for Deed?

A contract for deed, also known as a land contract, is a type of real estate transaction where the buyer agrees to purchase a property from the seller through a series of installment payments. Unlike a traditional mortgage, where the buyer obtains a loan from a bank to finance the purchase of the property, in a contract for deed, the seller serves as the lender and the buyer makes monthly payments directly to the seller. The seller retains legal ownership of the property until the buyer has paid the full purchase price, while in a traditional mortgage, the buyer obtains legal ownership of the property and the lender holds a lien on the property until the mortgage is paid off. Once the final payment is made, the seller transfers the deed to the buyer, who then becomes the new owner of the property.

Down Payment

It is our mission to make homeownership accessible to everyone, and this is reflected in our low down payment requirements. The down payment on most properties is around $5,000, which is a nonrefundable deposit that is applied to the purchase price, secures the property for the buyer, and is due at the time of signing the agreement. By keeping the down payment low, we help buyers overcome one of the biggest hurdles to homeownership and start building equity in their new home with a more manageable financial commitment.

Property Taxes & Insurance

We include the cost for property taxes in your monthly payment, and we pay the taxes from your escrow account each year.  Homeowners insurance is purchased by you from your insurance provider and not included in your monthly payment.  We require that Summit City Investments, Inc. is named as the Contract Seller on your Homeowners policy so that we received proof of insurance every year, as well as notification in the event your policy cancels.

Closing Costs, Inspection & Move In

Closing costs are typically only $430.  Closings are done by an Attorney and a Memorandum of Contract is recorded at the Recorders' Office for your protection.

Although the properties may require TLC, buyers have the freedom to upgrade their home to their own taste and on their own schedule. Prior to agreeing to purchase, buyers are responsible for inspecting the property and doing their own due diligence for any needed upgrades.

Is this for traditional homebuyers or real estate investors?

The short answer is, both! Our contract for deed program offers a unique opportunity for both traditional homeowners and investors to purchase and have immediate access to properties with a much smaller down payment and without the need for a credit check, income verification, or background screening.

For traditional homeowners, this program allows them to have full access to their property and the ability to renovate, decorate, and start building equity, with a lower barrier of entry and less stringent underwriting requirements than those of a traditional lender. Instead of paying rent, they can make monthly payments towards ownership of their property, providing a path to building long-term wealth and stability.

For investors, the contract for deed program offers an opportunity to quickly renovate and cash flow their properties with a low down payment and significantly fewer fees and interest points than hard money loans. The monthly payment often allows for a margin from the market rental rate, providing an opportunity to generate monthly cash flow from the investment. Additionally, investors can acquire multiple properties and scale their real estate investment portfolio seamlessly.

You might be a good fit for this program if…

  1. You would prefer to put a smaller down payment towards the property instead of the typical 20% down required by an institutional mortgage lender
  2. Your credit score or debt-to-income ratio aren’t quite there yet
  3. You’re self-employed or just got a new job
  4. You would rather put your rental payments towards building equity
  5. You want to scale your rental portfolio without tying up too much capital in one deal

Who is responsible for maintenance?

Much like a traditional home sale, all preventative maintenance, repairs, capital expenditures, and updates are the responsibility of the buyer. This differs from rent to own agreements where the buyer assumes the role of a tenant, and the seller retains landlord responsibilities. When purchasing a property using a contract for deed, you enjoy all the benefits and burdens of homeownership. We act as the lender to make properties accessible to people who have a hard time purchasing homes the traditional way.

Managing monthly payments

How do I pay each month and does the amount ever change?

As a buyer, your monthly payment will never change throughout the life of the loan, it is a fully amortized principal balance with a set interest rate and term. Buyers enjoy our ACH autopay system because it ensures a convenient and hassle-free payment process. We take care of all the setup prior to move-in and payments are automatically deducted from the buyer’s account each month. This eliminates the stress of paying on time and the worry of missing payments and incurring late fees.

What happens if I miss a payment?

Making timely monthly payments is essential for avoiding late fees and the risk of defaulting on your property. All payments are due on the first of each month. If by the fifth we are unable to process the monthly payment via ACH autopay due to insufficient funds, there will be a 10% late fee added. If we don't receive your payment by the 12th, we may have to file an unlawful detainer, which could lead to eviction. It is important to stay up-to-date with your payments to enjoy a smooth and stress-free experience.

What if I want to move out early?

All of our houses purchased using a contract for deed are fully amortized over a set period of time, usually 30 years to ensure monthly payments are manageable for buyers. If you want to move out before the end of the term, you have 2 options:

  1. Pay off the principal balance on the loan by selling or refinancing the property
  2. We offer a $1,000 move out credit which is eligible for buyers who do not want to wait to refinance or sell the property in order to move. To qualify for the move out credit, you just have to have lived in the property for at least 12 months, be current on all payments, and provide us with a 30 day notice.

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About Us

Here at Summit City Investments, Inc., we are a multi-service company that BUYS, MANAGES, and SELLS HOMES while focusing on providing you with Fast, Friendly, and Flexible service.

Contact Us

Summit City Investments, Inc.

2200 Lake Avenue, Suite 123
Fort Wayne, IN 46805

Mike MacDonald
(260) 264-7764
[email protected]