A contract for deed is an alternative financing agreement in which the seller finances the sale of the property rather than a lender.

No Mortgage Registration Tax  is due on the recording of a contract for deed because a contract for deed is exempted under the MRT law.  View the law, Minnesota Statutes, Chapter 287.04 subdivision(d).

Completion of Contract for Deed

Example: 

(A) Tom sells real property to Nancy for $ 300,000 on a contract for deed.

Terms:   $    60,,000 down payment

$ 270,000 ($ 1,998 monthly for 60 months)

Property taxes yearly $4,000 =$333 a month

Property Insurance $300 a month

Total Monty payment $2631

There is a Balloon Payment in 5 Years.

When the contract is “paid in full” and Toml provides a warranty deed to Nancy.  Deed Tax is due on the $300,000 purchase price. How does Nancy payoff the contract in 5 years? She would have to refinance the contract with a mortgage or Sell the property. Nancy can sell the property or Refinance the home any time with the five year contract in Minnesota. 

Cancellation of contract for deed

No Deed Tax is due on the cancellation of a contract for deed. It is included as an exception to the tax under M.S. 287.22, Clause (1). The result of the cancellation is that the grantor retains legal ownership of the property.

Assignment of grantor’s (vendor’s) interest with warranty or quit claim deed

Under a contract for deed MN , the grantor retains the legal title to the real property until the purchase price is paid in full and the other terms of the contract are completed.

Before a contract is paid off, the grantor (vendor) may choose to assign its contract rights to a third party.

Assignment of a grantor’s right to receive the payments is exempt from Deed Tax because no real property is conveyed. However, if the grantor issues a deed to the property along with the assignment, the conveyance document is subject to tax. Tax is based on the price paid for the assignment less the current contract for deed principal balance.

Tax exemptions on Contract for Deed MN

Contract for the conveyance of any interest in real property, including a contract for deed.

Deed following Contract for Deed MN

Deed Tax is due on the conveyance of legal ownership of real property with a deed following the satisfactory completion of the terms of a contract for deed. The deed that conveys legal ownership of the property from the grantor to the grantee is taxable.

The basis of the Deed Tax is the total consideration for the conveyance. In most cases, the total consideration is equal to the principal amount of the purchase price agreed upon at the time of the sale.

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Contract For Deed Company MN