Bond For Deed
We are a licensed professional third-party administrator escrow agent for Bond for Deed contracts. Escrow Services, Inc. is the industry's leading escrow agent with experience and expertise required to properly service Bond for Deed contracts, Installment Options, and Private Mortgage Notes.
Check out our brief informational videos on Bond for Deed.
What is a Bond for Deed?
A Bond for Deed is a Louisiana real estate contract in which the purchase price is paid in installments, and title is transferred after the payments are made in full. In other states, a Bond for Deed is called a Contract for Deed or a Land Contract.
Because Bond for Deed is a Contract:
- All terms are negotiable between Seller and Purchaser
- No third-party requirements are necessary to close
- Appraisals and Inspections are optional at the parties' discretion
- No Debt Ratio or Income Ratio tests
- No Loan-to-Value requirements
- Interest Rate is set by Seller and Purchaser
When to Use a Bond for Deed?
- Purchaser/Property Doesn't Qualify - Use a Bond for Deed whenever the Purchaser or the property does not qualify for a loan. Many would-be Purchasers can not qualify for a new mortgage...sometimes the property doesn't qualify...the reasons are endless. The terms of the Bond for Deed are strictly between the Seller and Purchaser.
- Owner Financing - Use a Bond for Deed whenever the Seller will finance all or a portion of the sales price. Cancelling a contract for non-payment is much less costly than foreclosure.
- Material Down Payment - Use a Bond for Deed when the Seller requires a material down payment. A Bond for Deed provides benefits and advantages to a Buyer which justify the investment of a material down payment.
- Bridge Financing - Use a Bond for Deed to buy or sell property today and "bridge through" to a future period when mortgage rates or insurance underwriting become more favorable, market values increase, or the property is renovated or improved.
- Save Money - Use a Bond for Deed to save closing costs. When you buy or sell property under the Bond for Deed contract, you do not have to pay 'points', appraisal and survey fees, private mortgage insurance (PMI), or for repairs required by a mortgage company before it will make a loan.
- Mortgage Not Assumable - Use a Bond for Deed whenever the existing mortgage is not assumable. Anyone can make the payments of an existing mortgage and court decisions have clearly established that permission of the mortgage company is not required, unless the mortgage specifically prohibits Bond for Deed.
- Assumable Mortgages - Use a Bond for Deed whenever the existing mortgage is assumable and the mortgage company will not give the Seller a written "release of liability". If the Seller still has the liability of the mortgage, he or she should retain title to prevent credit problems created if the person that "assumed the loan" does not pay.
We do the Job!
To protect all parties in a Bond for Deed, Louisiana law requires the services of a licensed escrow agent. As that agent, we collect payments, pay any underlying mortgages, and issue IRS 1098 interest reports. In the event of non-payment, we send the required notices to both Purchaser and Seller.
The Seller earns interest as the "Lender". Sales price is not dependent on mortgage holder's requirements. Property is acquired "as is", and the Purchaser is typically responsible for paying taxes and insurance. The Seller is not a Landlord.
Neither the Purchaser nor the property has to qualify for a loan. The Purchaser can claim IRS interest deduction, and he or she builds equity through amortization of the Bond for Deed contract and market appreciation. Also, the Purchaser has benefits of home ownership and is not a Tenant.
Additional Information on Bond for Deed
- Recordation: The Bond for Deed contract is recorded in both the Conveyance and Mortgage records in the Parish's Clerk of Court's office to protect the rights of both parties.
- Maintenance: The Purchaser is responsible for repairs, maintenance, insurance, etc., after the closing of the Bond for Deed contract.
- Insurance: Property insurance should be carried in the owner's name with the Purchasers listed as Additional Insurers. Title insurance is also available to ensure the validity of the title that is to be conveyed to the Purchaser.
- Tax Deductible: The IRS treats a Bond for Deed the same as an installment sale for tax purposes.
- Power of Attorney: Our contract includes a Power of Attorney empowering Escrow Services, Inc. to transfer ownership of the property to the Purchaser upon full payment or refinancing.
- Bankruptcy: In the event the Seller files a bankruptcy action, the Purchaser is protected by the Bankruptcy Code.
- Death: The death of a Seller or Purchaser does not affect the validity of a Bond for Deed. As a "Heritable" contract under Louisiana Civil Code, the heirs inherit the benefits and the obligations of the Bond for Deed.
- Refinance: Mortgages to Buyers under a Bond for Deed qualify as refinances by mortgage lenders rather than new purchase loans. Payments to Escrow Services, Inc. are viewed as mortgage payments paid to an independent third party by mortgage loan underwriters.