Rental and Land Contract Counseling

Center for Financial Health is a HUD-approved housing counseling agency serving renters and home buyers with a variety of housing needs.  From locating safe, affordable housing to understanding complicated rental, lease or land contract agreements, Housing Counselors assist renters and buyers in becoming informed decision makers on housing and financial matters.  Call to schedule a FREE, confidential counseling session with a certified, experienced Housing Counselor today (517)708-2550.

 

Executive Director, Denise Keiser, provides a brief overview of Land Contracts during an interview with Fox 47's Morning Blend Host, Mary Turner.  Click on the video below to learn more about Land Contracts.

 

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

    For Sellers:
    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

    For Buyers:
    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, but here are just a few:

    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.

Rental Counseling

  • Housing Counselors highly encourage renters (tenants) to reference the Landlord-Tenant Handbook for Michigan for common questions about the rights and responsibilities of tenants and landlords. Click on the link above to access the Handbook.

    Renters may call to schedule an appointment with a certified, experienced Housing Counselor at (517)708-2550.