Sellers

HomeOwner Makers Educational Services (H.O.M.E.S.)

Our “Qualified” Contract for Deed (QCD)™ is a great New tool for Sellers

  • If your financial plan includes selling some of your rental properties and making a big profit to grow your wealth, the QCD™ may be perfect for you.
  • It was designed to be a painless transition for your tenants (or other buyers), to buy your rental property and become immediate Homeowners by getting an “equitable title ownership interest” at QCD™
  • Their new property value will be at “owner-occupant” price levels, which are normally dramatically higher than your rental value.
  • A QCD™ is a simple contract with low down payments and no buyer closing costs.
  • There is no need for a buyer to qualify for a purchase mortgage to become a homeowner.
  • The home price will be set by the buyer and seller, using both income valuation methods (current rent and expenses) and comparable market sales.
  • The goal is to keep the monthly costs affordable and near existing rent amounts.
  • The new owner will also be eligible for the income tax benefits of homeownership.

Our Valuation and Payment Calculators will help you decide on the sale price, interest rate, monthly payments, equity build-up, and estimate the buyer’s new housing costs.

  • QCD™ contracts are usually structured with a 30-year term with a fixed monthly payment of principal and interest. After making at least one year of timely payments, the new owner is eligible to apply for a refinance mortgage to pay off the remaining contract balance.
  • We expect large numbers of renters who don’t have the down payment saved to qualify for mortgages will be able to use our method to buy their first home.

Our other educational courses for Buyers, and a Realtor Certification Bundle are also available through our website, and you may want your real estate professional to become QCD™-certified to assist you. The cost of the training should be tax deductible for most sellers.

For you -Enrolling in the H.O.M.E.S.’ SELLERS Course is your first step. Welcome!

Enroll in our Comprehensive E-Learning Course: How Sellers Benefit from the QCD™ Process

ENROLL HERE

These are the usual steps in a landlord seller’s QCD™ process:

Step 1

Talk to your existing commercial mortgage lender to discuss their participation in the QCD™ process. While they normally remain in first position of security during the contract term, the contract buyer will have certain rights after the contract closing. Your lender may also want to provide a new buyer with a residential refinance mortgage, after the recommended 2-year “seasoning” period of timely contract payments.

Step 2

Consult the home listing services and other sources to determine comparable property values for similar (owner-occupant) homes nearby. These tools can help you set a sale price range for you and the buyer. Again, a local Realtor can help both parties set valuation to agree on the initial contract price.

Review our Rental Home Value Calculations Considerations and Analysis example to understand the modified income approach for the home value. This approach uses the existing monthly rental amounts and the new costs of home ownership to help value the home.

Step 3

If the buyer is not your existing tenant, your normal tenant underwriting process for leasing is advisable prior to the contract execution. Our website will also eventually contain several mortgage providers who will want who to work with your buyer, after suitable performance of timely payments on the contract and after a least a year, per FHA and GSE policy guidelines, to refinance the contact balance to a conventional mortgage, when the deed is conveyed to the buyer along with legal title (replacing the contract’s equitable title).

Step 4

Set a down payment amount, contract interest rate, and a contract term. Sellers often use a 30-year amortization term to allow the buyer to build equity, but “interest only” terms, with agreed upon future principal payments, may also be a contract option element. We suggest using 1% – 1.5% of the purchase price as a down payment and reviewing the current market mortgage interest rates. A qualified Realtor can also provide advice.

Step 5

Contract closing is quite simple, but our QCD™ guidelines consider having the following elements:

  • legal Counsel involvement.
  • a title insurance update for the buyer.
  • purchasing of an appliance and systems
    home warranty to protect the buyer during the contract period.
  • A home inspection

Step 6

Consult your tax adviser as to contract sale profit treatment.

Contract sales are normally treated as installment sales for tax purposes of capital or other gain. Depreciation recapture may also be a consideration.

Step 7

Most contracts provide for a buyer having the ability to terminate, that is, change their mind about accepting/proceeding with a refinance mortgage to pay off the contract balance. If a contract is terminated and the property is returned the house is usually just resold. Contract termination usually means the buyer forgoes any principal paid or equity in the home they may have at that time.

Step 8

A seller should also explore the many flexibility aspects they can access when using a QCD™ contract, such as:

  • Including longer contract terms to defer taxable gains.
  • Assumption of the contract balance and equitable ownership, with seller approval, by a different buyer.
  • Any such elements as your Attorney and Realtor might advise.

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