Contract for deed and equity

[Matt Hunziker]

HI I bought a house using contract for deed with the intention of flipping it. I put 5k down owe 30. It's worth 80 as is. My credit is poor 530. Lenders I have talked to say I don't own it don't understand how that is.

My question is how do I access the equity in the home?

[Don Konipol]

@Matt Hunziker

Actually, you won't. In order to perfect a lien against real property, the borrower must hold title to said property. Filing a contract for deed will not give you title, it will merely place notification in the public record that you have a claim on the title. Any mortgage financing will need the signature of the legal title holder. I guess it's possible that someone would lend so,e money based on your contract for deed, but this wouldn't be a mortgage loan. Your attorney might be referring to thinking that recording the CFD will show you have put $5k down and make it easier to finance out of the CFD but it doesn't work that way. Sorry to be the bearer of bad news, but here's a couple of key points anyone should understand before entering CFD

1. With a CFD you may obtain equitable title, but you don't obtain legal title. Lenders only care about legal title.

2. Lenders do not regard financing you out of a CFD as a refinance, they regard it as a purchase loan

3. By recording the CFD, you may make it impossible for the seller of the CFD to intentionally encumber the property, which is a good thing for you.

4. Buying with a CFD does not eliminate your bad credit in trying to qualify for a new loan

5. In some states recording a CFD, if the CFD is written correctly, may be considered a superior encumbrance to any other liens or encumbrances filed after the CFD is filed, except liens for property taxes.