Deed of Trust or Land Contract?? - Posted by Scott SC

Posted by Michael Morrongiello on April 23, 2000 at 18:48:07:

A deed of trust can typically be foreclosed in a non judicial proceeding. Land contracts in many states are now having to be foreclosed with judicial proceedings just like a mortgage.

By selling a property to a buyer under a land contract at some future point in time a deed will have to be delivered and if applicable deed transfer taxes will be due. If you ever wish to SELL the land contract and covert its income stream into cash you might get hit for double taxation on the deed transfers (once for deeding to the investor who purchases your land contract and the 2nd time around for when you have to ultimately deliver the deed to the contract buyer).

Selling now using a trust deed allows that tax to be paid now and only once. The Trust deed or mortgage instrument is easily assignable and avoids paying addditional taxes on deed transfers.

A Land contract can prevent a buyer from having their liens or judgements attached to the cloud the title of the property you have sold to them under the contract terms since they do NOT have legal title yet.

If you intend on holding the paper long term then I would suggest going with a contract in your state as long as the foreclosure process is not protracted. However if you are going to possibly want to convert your paper into cash at some point in the future then I would use a more customary mortgage and note or Trust deed and note instruments.

Michael Morrongiello

Deed of Trust or Land Contract?? - Posted by Scott SC

Posted by Scott SC on April 23, 2000 at 17:57:50:

Can someone please tell me the difference between a deed of trust and a land contract and which one is better when structuring an owner finance deal (as the seller)??