Land Contract Counseling
Land Contract Counseling
What is a Land Contract?
A 'land contract' is a contract between a seller and buyer of real property or a home in which the seller provides financing to buyer to purchase the property for an agreed-upon purchase price and the buyer repays the loan in installment payments. Under most land contracts, the seller retains the legal title (ownership) to the property, while permitting the buyer to take possession of it for most purposes other than legal ownership.
Reasons for a Land Contract
1. To expand the pool of eligible buyers in a tough Real Estate Market
2. To put a "twist" on the Rental Agreement offered by some Landlords
1. To provide a financing tool that allows the buyer to purchase a home when they are not
yet "Mortgage Ready"
What can go wrong for Home Buyers using a Land Contract for the purchase?
Lots of things could go wrong for buyers using a Land Contract to purchase a home.
Just to name a few are:
1) The cost of a Land Contract verses a traditional mortgage may be higher due to higher
interest rates charged by the seller.
2) Full ownership does not typically pass to the buyer until the Land Contract is paid in full.
Ownership rights can be very limited for buyers in Land Contracts.
3) Consumer protections are not in place for buyers, so buyers may be easily taken advantage
of by predatory sellers.
4) Because there is no standardization of Land Contract documents, details of the transaction
could be missing or unknown by the Buyer until a problem arises.
5) If the property taxes go unpaid, the buyer could lose the home to foreclosure and all
deposits, down payments or monthly installments made to the seller.
6) If a mortgage lien is owed on the property, either known, or unknown by the buyer, the
home could be lost to foreclosure. Additionally, the language in the Land Contract may
allow the seller to mortgage the property again, even after the buyer makes the purchase.
7) If the buyer does not request a comprehensive title report from a title company, there is
no way to verify that the seller actually owns the property free and clear of any liens and
has the legal right to sell it, or that no other parties have an interest in the property.
8) If the buyer does not obtain a home inspection prior to purchasing the home, deferred
maintenance could become the responsibility of the buyer.
9) If the buyer executes the Land Contract without paying for a professional appraisal report,
the buyer may end up paying more for the home than what the actual market value is at
the time of the purchase.
10) Because the Land Contract is an installment agreement, not a rental agreement or lease,
the buyer's deposit and/or the cost for any improvements made to the property may not
be refunded if the buyer falls behind in payments and has to vacate the property.
Contracts may vary in content, so it is strongly recommended that buyers seek legal advice
prior to executing a Land Contract.
The nonrefundable fee for Land Contract Counseling is $125 per session.
Schedule a confidential appointment today - call (517)708-2550 or email us at email@example.com.