Know the New Minneapolis Duplex Contract For Deed Rules

Would you believe Minnesota ranks 4th in the nation in the number of recorded contracts for deed?

In fact, between 2005 -2022, the state recorded 47,524 of them! Only Michigan, Ohio and Wisconsin ranked higher.

A contract for deed, also known as a land contract or seller financing, is when the property owner serves as the bank for the buyer.

According to Pew Research, this form of financing is most often used to purchase residential properties in urban areas.

Whether you’ve sold or purchased a property using this form of financing, it’s important to know several new laws went into effect in the state on August 1 that may impact your loan. The most important is those who purchase a property using a contract for deed will now have more time to get caught up if they fall behind on payments.

Previously a seller could cancel a contract in 60 days. In other words, if the buyer missed two payments the property would revert back to the seller.Now, however, a seller must give the buyer 30 days notice before the new 90-day cancellation starts. This effectively gives the buyers as much as 6 months to get caught up on payments before the seller regains ownership and control of the property.

If a seller cancels a contract in its first four years, the buyer must be refunded any portion of their down payment that exceeds 10% of the purchase price.

Prior to the rule change, buyers were responsible for recording the contract. Now that burden is on the seller. If the seller fails to record the contract, they lose their right to cancel the contract.

If the seller has a mortgage on the property and fails to disclose this to the buyer, they are in violation of the state statute and can be help responsible for paying the buyer damages and attorneys fees.

Pew Charitable Trust believes the prevalence of contracts for deed in the Midwest are the result of redlining practices that denied financing options to residents of certain communities with high populations of homebuyers of color.

Minnesota DFL Sen. Tina Smith and Wyoming Republican Sen. Cynthis Lummis have proposed federal legislation that would require all contracts for deed to be recorded, as well as grant some foreclosure protections to buyers.