Posted by John Behle on March 30, 1999 at 09:25:31:
Your LTV ratios are good, but with the lack of credit and seasoning, many buyers will shy away. A local buyer using their own funds may jump at this one though. Shop it around locally.
You don’t say the area, so I cannot comment specifically, but in some states buyers really shy away from land contracts or will not buy them at all. It depends on your local forms and laws. The local buyers will inform you about that.
The insurance requirement isn’t that far out of the ordinary or too much too ask.
A local business man approached me regarding a recent land contract that he put together. He had asked me what I thought about the way his attorney structured this deal. Also he had asked if there was a possibility that I could sell this land contract so he could pull out some cash. The contract reads as follows;
FMV - $40,000
Sold For - $25,000
Downpayment - $1,500
Financed Amount - $23,500
Term - 20 years
Payments - $211.44
Interest Rate - 9.0%
This is a fresh land contract, no seasoning, borrowers have basically no credit. Owner wants the borrower to carry $30,000 property insurance, and $300,000 liability insurance on this house. What about the $300,000 liability insurance this sounds a little high. Late payment would be 2% of the mortgage amount if 15 days late.
Would this land contract be marketable? if not what could be done to make it marketable?
WIIFM - By helping this man out with this land contract what would be considered a good percentage to charge if this note was to sell?