A common query in the realm of real estate transactions, especially contract for deed arrangements, revolves around the ‘due on sale’ clause typically found in consumer mortgages. Understanding this clause and its implications in commercial loans is crucial for both buyers and sellers.
The ‘Due on Sale’ Clause in Consumer Mortgages In most consumer mortgages, a ‘due on sale’ clause is a stipulation that requires the full loan balance to be paid if the property is sold. This clause prevents the new buyer from taking over the existing mortgage terms, impacting the flexibility of property sales.
Commercial Loans and Contract for Deed Transactions Our approach to real estate financing deviates from conventional consumer mortgages. We utilize commercial loans to purchase properties, which are fundamentally different in structure. Unlike consumer mortgages, commercial loans used by us do not typically include a ‘due on sale’ clause.
Benefits of Absence of ‘Due on Sale’ Clause The absence of this clause in our commercial loans offers a significant advantage. It allows us to sell the property on a contract for deed immediately after purchase without the requirement to pay off the loan in full. This flexibility is a key enabler in contract for deed transactions, making it a viable option for many buyers.
Trade-offs in Commercial Financing While we may not receive the lowest interest rates available in the market due to the nature of commercial loans, the trade-off comes in the form of greater flexibility in property transactions. This flexibility outweighs the potential cost difference for many of our clients.
Understanding the nuances of real estate financing, including the impact of the ‘due on sale’ clause, is essential for anyone involved in a contract for deed transaction.
If you have questions about how commercial loans facilitate contract for deed sales or need advice on your specific situation, contact us at A Good Deed. We’re here to provide clarity and guidance on your real estate journey.
