Minnesota Investors: Deed of Trust or Contract for deed?

9 Replies

Question to Minnesota Investors familiar with Seller financing: I'm looking to work with a couple sellers who own property free and clear and are willing to do selling financing. What type of transaction(s) did you do (CD vs D of T), how was it structured, did you hire an attorney to write or vet your contract and BONUS: are you willing to share the basic contracts/documents (what I'm really in need of). I always thought "contract for deed" was the customary seller-financing structure, but was advised by the BP community that a deed of trust combined with a note is more prudent. To further confuse me, The purchase and sale contract endorsed by the MN realtors association lists contract for deed in the financing section, but does not mention deed of trust. Bottom line, I'm confused about what should be used and need some help. Would greatly appreciate any help you can offer. Thanks! Justin

I've done many, many seller financed deals. I'm guessing the Realtor contract uses CFD because it's generally perceived to be safer for the seller from the stand point of getting the property back in case of a default. Of course, that means it's less safe for the buyer unless you get the deed in escrow (if you pay off the CFD and the sellers have since moved, divorced, died, etc., getting your deed may be a real problem so it is critical to have it placed in escrow generally with an attorney who has bulletproof escrow instructions). Even if someone shares their "great" docs with you, it would be foolhardy to use them without running them by a good attorney with a lot of experience in this area. I always try for a deed of trust and note but will settle for CFD and an escrow if that's the best I can get.

Henry has some catching up to do with the current issues of a CFD, no offense Henry, once very popular for decades, they heave bumped into "circumventing foreclosure laws" and title issues. Another aspect is that attorneys die, deeds are lost, some Recorder's have changed recording standards and won't accept stale documents, delivery of either deed can have issues.

Go with a note and deed of trust.  

Standard Realtor's contracts are probably out of date and it could be that your area hasn't kept up with the new issues mentioned, a CFD may well be accepted in your area, I'd hate to be the first one to encounter problems after a deal was 2 or 3 years into in!

Your standard contract probably has a financing section, where you check off the type of financing, like FHA, VA, Conventional, it should have seller financing, if not, just write it in.

Get a mortgage servicer involved, if you've been reading the forums you should have seen the benefits to both lender and buyer as well as compliance matters that have changed. 

Buying real estate is a bid deal, I suggest you get with a real estate attorney to ensure your note and transaction are in compliance. 

BTW, RE contracts are subject to state laws as well as federal, using contracts that someone else uses can be dangerous with real estate or financing, not a good way to go really. See your attorney for good contracts, they can be used over and over, so the cost of your compliance is spread over a long term with many transactions, not just one. 

Good luck :)

Justin, Bill makes some excellent points and is clearly a knowledgeable contributor to BP; but just as my reply should have been more thorough (thank you, Bill, for politely pointing out some of the oversights), I believe even further considerations are worth noting.

Minnesota's laws are important to understand.  I'm not from Minnesota and haven't a clue on what they may or may not present in the form of an obstacle for seller financing of any type.  I believe laws in general may constrain or place requirements on the sellers depending upon whether or not the subject property was used as a personal residence or as an investment property.  Clearly Bill's comment regarding foreclosure laws, while they may be important in some situations, must have been meant as a generic comment since the property is free and clear.

Here is where I have a different point of view than Bill (or, to be fair to Bill, than Bill has shared in this particular post).  Real estate investing is a business, sometimes a messy business filled competing interests, unclear answers, uncertainties, and unknowns.  We all have to make judgments and decisions based upon the best available information (including laws) and the potential profit.   Bill and I agree that getting the deed is the best choice, period.  However, if the sellers absolutely rule that out would I walk from the deal?  The answer - for me - is I wouldn't walk from the deal if the profit potential was large enough (perhaps I could buy it - all in - including all costs of repair, closing, holding, etc. - for 50 cents on the dollar or less) and had an adequate plan to deal with the risks.  

If I believed an escrow could be established with a law firm likely to be in business for the term of the CFD, at least in my state (as I currently understand the laws) I would proceed. If the law firm went out of business and/or lost the deed (or as happened one time, a paralegal mistakenly shredded a deed that had not yet been recorded) and the sellers failed to or refused to or couldn't cooperate when the CFD was paid in full, I'm quite confident the cost of cleaning up the mess in the courts (at least in today's dollars) would highly likely in my state be $3000 or less (yes, there are circumstances when this number could be higher but they are highly unlikely and still would almost certainly allow the deal to be profitable). Well worth the effort and well worth the risk in my opinion. Might it be more expensive in other states? Probably. Might it be impossible in other states? I suppose. That's why we all have to be careful about what we write and how we interpret posts on BP.

I'm very conservative in the practice of my business but the most profitable deal I've ever done (a moderate 6 figure profit) - on the surface - looked riskier than the devil.  I took time to understand the risks, mitigated them, and ultimately only had to deal with one moderate hiccup.  The more experienced you are, the better you can deal with these things.

As real estate investors we owe it to ourselves to know (or learn) our business, get good counsel when we don't know or are unsure, and then proceed when the profit vs. the risks give us a clear green light.


I've done quite a few of owner-financed sales in Minnesota over the years. A Deed of Trust/Promissory Note would not be generally used in MN as it is a judicial foreclosure state. A Mortgage/Promissory Note would be used instead.

Minnesota is still a very contract for deed "friendly" state, especially if you use the state supplied form which is Form 54-M. It's a fill in the blank form designed to be recorded and it is what is used in most C4D transactions in MN.

I ,as a buyer, have a contract for deed in Minnesota and one in North Dakota. I had my lawyer do mine in Minnesota and it is filed with the county/state and when I bought my property, with a contract for deed, in North Dakota I again asked my lawyer to do it but he wasn't licensed in North Dakota  so he referred me and another lawyer in North Dakota and took care of everything. I just signed the documents and paid. They both are Real Estate Attorneys. I setup the Amortization Schedule and everything is done. Easy fast no banks. Each one cost me around $350. I pay 5% interest. 5 year loans balloons at the end. I am looking to purchase another property right now and am going to do the same thing. Best advice find a Real estate lawyer.  I would never do anything without a lawyer.  thanks JOHN

@Justin Hennig

Minnesota's one of those states like Ohio that contract for deed or land contracts are very very common. You need to understand your local laws and get a great attorney when you buy on terms

Know what it takes to foreclose/repossess when you sell on contract for deed to alleviate the sellers nervousness about selling on terms

Use a loan servicer

@John Hand

 @Zach Johnson

I live in WA state and I'm helping a friend living in WA state with her home in MN.

We want to do a contract for deed. She still has a mortgage on her home. Does her lender/bank need to be notified that we are doing a contract for deed?

John, will you share the contact info for the lawyer you use?

Thank you gentleman.

Beeson Law Office

611 Summit Ave # 212 Detroit Lakes, MN 56501

(218) 844-5000

Brant Beeson is the Attorney I used and my parents used. I have a contract for deed with my parents on a building in Frazee they owned and they sold a lake lot west of MPLS to another guy and Brant set up both contract for deeds. In North Dakota Brant recommended and I used them on the house I am living in right now.

Angie Strege Coppin


Kennelly O’Keeffe Attorneys

720 Main Avenue

P.O. Box 2105

Fargo, ND 58107-2105

Phone: (701) 235-8000

Fax: (701) 235-8023

[email protected]

Hey Justin, 

I just purchased a property a couple months ago on a contract for deed and I had my title company draw up and file the documents (I know they had done quite a few of them before). Thinking about it more, hiring an attorney would be your most bullet proof way to go. So far, though, everything's gone well and we're on track to sell the property in two weeks.

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