Buying with a Land Contract? - Posted by LeonNC

Real Estate Investing
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Posted by Stacy (AZ) on March 21, 2000 at 23:47:04:

…especially with your last sentence:

“At this point I am not as desperate for the seller financing when I’m the buyer, but for the right deal, and the right property I’d buy on contract knowing the risks.”

Stacy

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Buying with a Land Contract? - Posted by LeonNC

Posted by LeonNC on March 21, 2000 at 12:46:19:

If anyone has the time could you explain under what circumstances I might BUY using a Land Contract. I think I’ve got the “how to” but it’s the “when” that I think I’m confused about and the ramifications of doing so. I know some of the more experienced people here like to have control of the deed but I’m kind of new so I guess I’m willing to risk a little more…maybe. I’ve got the paperwork I just need to know when this tool will come in handy. Also, as it ties in with this subject when would you buy using a wrap. I know it all hinges on the seller but I just need some real world information from the people who know! Thanks-again.

LeonNC

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WHEN Buying with a Land Contract? - Posted by David

Posted by David on March 21, 2000 at 17:56:45:

  1. when the interest rate at the bank is higher than the seller.
  2. when the property can’t be FNMA/FHMAC financed and the bank wants higher than conventional rates and terms.
  3. when the seller wants less down than the bank.
  4. when the bank tells you that you exceed the more than 4 mortgage rule of FNMA.
  5. when you’re able to deal with the hopefully not to soon balloon.
  6. when the bank tells you your credit isn’t good enough but you knwo you can handle it.
  7. when you want to save on closing costs, including junk fees.
  8. when tied to some other term of the sale such as price or interest rate makes a very attractive total picture than might not be as attractive other wise.

The potential problem can be if the seller overleverages the property either befor or after the “sale”. But there are ways to safeguard against that.
Personally i like to get the deed when buying and i want to give the deed when selling. But all thing considered i prefer to buy on cantract rather than sell on contract, i can always find uses for the cash.
hth
David

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Re: Buying with a Land Contract? - Posted by William Bronchick

Posted by William Bronchick on March 21, 2000 at 16:01:36:

I use a land contract when the seller won’t give the deed. Both give you ownership for tax purposes and both trigger the due-on-sale of a mortgage. I just prefer the deed because it is a stronger legal position. When the owner is concerned about you paying on hisloan, then offer the land contract so he feels more in control.

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Re: WHEN Buying with a Land Contract? - Posted by Stacy (AZ)

Posted by Stacy (AZ) on March 21, 2000 at 18:48:02:

Hi David-

You stated that you’d rather buy on contract then sell on contract. Maybe your state’s laws are different, but in many states it’s easier to get back a house you’ve sold on contract than if you had sold using a deed of trust or mortgage. In AZ for example, it can take as little as 30 days to foreclose on a land contract. This being the case, I think selling on contract has advantages over the other methods in some states.

For the same reasons, I’d rather not buy on a land contract. Also, being the buyer, there’s the question of title and not owning the deed. If the seller decides not to allow the deed to transfer when the contract is fulfilled by the buyer, or the seller dies or disappears, there could be problems for the buyer beyond a deed of trust or mortgage.

Just my take-

Stacy

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Re: WHEN Buying with a Land Contract? - Posted by Paul_NY

Posted by Paul_NY on March 21, 2000 at 22:45:48:

Title: have a 3rd party hold the title. This may soften the impact should a seller become incapitated.

DO have a title search BEFORE closing on the land contract. Motivated sellers are sometimes behind in taxes, may have other liens or judgements attached to the title.

I prefer the deed at closing also. Its just as easy to write a note and mortgage or a deed of trust.

Paul_NY

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Good points all… - Posted by David

Posted by David on March 21, 2000 at 19:05:21:

Stacy,
I did have a bad experience with selling on a deed and taking back a mortgage. The buyers after paying 50% decided/was decided for them to default. A judicial default takes 6-12 months and costs me about $5,000. There were times when I thought I would be better off walking away rather than spending the money. I had a partner who decided to bail out 3/4 of the way through the foreclosure. Our buyer had “sold” the house on a verbal cantract to somebody else. It was a mess. My partner suggested that we stiff the attorney doing the foreclosure. I said NO WAY, and got him out of the partnership. there were several reasons why I wanted the deed transfered originally including liability, as a mortgage holder we had little or no liability. and as the mortgage holder we would not be responsible for any future code enforcement issues. We sold the house with a city inspection and cleared all the problems. Deeding the property was a way to stop any further codes problems. I’ve financed other houses and mostly kept the deed. My first choice is cash out, including helping with closing costs, etc. second choice is a second mortgage, with say 80% cash out, and the third choice is me finance.
At this point I am not as desperate for the seller financing when I’m the buyer, but for the right deal, and the right property I’d buy on contract knowing the risks.
David