Posted by David Alexander on March 10, 1999 at 19:50:31:
Stacy,
I knew that, was just typing without thinking, sorry.
I wonder if I’ve caused my daughter the same problem in the years to come. I named her Saxon, actually I’m counting on it, just for shock value,LOL.
David Alexander
Help Me Understand Land Contract Advantages? - Posted by Stacy (AZ)
Posted by Stacy (AZ) on March 10, 1999 at 12:06:46:
OK, I’ve bothered my title guy enough, and I think I confused him in the process (heh, heh). And I can’t find the full answer within the AZ revised statutes. I’m trying to determine why I should use a Land Contract under certain circumstances rather than a note and Trust Deed. This question is for selling property with seller financing.
My research has turned-up the following:
In AZ, the equivilent of a Land Contract is called a Sales Agreement, or Agreement of Sale. Not used very often here, but it’s available if I need to use it.
The main legal differences between Trust Deeds and Sales Agreements in AZ are:
a. Property sold with a Trust Deed conveys legal title to a third party trustee until the contract is complete, whereas with a Sales Agreement, legal title stays with the seller until the contract is complete. Both convey equitable title to the buyer at the time of the sale.
b. The foreclosure period for Trust Deeds is 90 days, but the foreclosure period for Sales Agreements depends on the amount of equity held by the seller. If the seller received up to 10% down, the foreclosure period is 20 days, and the number of days increases as the seller’s equity decreases.
My title guy said that the seller retaining legal title instead of the third party trustee doesn’t really matter, in reality…even though it sounds great in theory.
Now I’m confused. Is the only real advantage of using a Sales Contract that you can foreclose sooner? For those who use Land Contracts, does the AZ Sales Agreement sound the same?
Thanks in advance for any insights-
Stacy
Re: Help Me Understand Land Contract Advantages? - Posted by Reif
Posted by Reif on March 11, 1999 at 23:37:59:
Another advantage for the seller is that you can refi the underlying if it can make your wrap better.
This is another reason you don’t want to record your contract.
Reif
Thanks Stacy! - Posted by rayrick
Posted by rayrick on March 11, 1999 at 09:03:12:
You inadvertantly answered a question that has been bothering me since the convention. I was talking to John Burley and he kept talking about buying and selling with and “Agreement for Sale” and I was too embarrassed to ask “what the heck is that?”. I think he is based in AZ. Now I know. Thanks.
-rayrick
Re: Help Me Understand Land Contract Advantages? - Posted by Jason-DTX
Posted by Jason-DTX on March 11, 1999 at 24:08:05:
I agree with David, When you’re selling you want to be able to get the property back asap in a default. If the buyer pays good for the whole loan then it really doesn’t matter what type of sale you use since everything went perfect.
However, you want to protect yourself for the worse case senario - your buyer defaults. When that happens you want to be in the position to get the property back asap. Usually the fastest way to get it back is with a land contract.
Jason Windholz
Re: Help Me Understand Land Contract Advantages? - Posted by Kieran Fahey
Posted by Kieran Fahey on March 10, 1999 at 13:08:45:
Hello there…I can’t help you with your question as I am a novice, but I’m sure you will get help here. There is a CREI club being started here in the Phoenix area…first meeting next Tuesday. I was wondering if you were interested in participating and what your comments were on even starting such a club.
Re: Help Me Understand Land Contract Advantages? - Posted by David Alexander
Posted by David Alexander on March 10, 1999 at 12:53:08:
That is the enough of an advantage isn’t it. It is the same in here in Dallas, you can cancel the contract after so long depending on the down, then I have a clause stating that they become tenants of sufferance, and evict. The disadvantage is that if you do alot of these you could end up being a dealer and taxes will Hurt. For myself I’ll probably start selling on a L/O.
David Alexander
Re: I don’t get it - Posted by Stacy (AZ)
Posted by Stacy (AZ) on March 12, 1999 at 16:14:34:
Reif-
Selling with a Land Contract, I can refi the underlying loan, but selling with a trust deed I can’t?
If I record the Land Contract, I wouldn’t be able to refi the underlying loan?
I’m going through a brain lock on this one, can you explain a little more what you mean? I thought the only difference between a TD and Land Contract was the foreclosure period. I’d sure like to understand, sounds like I’m missing something.
Stacy
Re: Help Me Understand Land Contract Advantages? - Posted by Rodney (AZ)
Posted by Rodney (AZ) on March 10, 1999 at 21:03:40:
Hi! I saw your response to Stacy (AZ), and noticed that you
mentioned the possiblility of a CREI club starting in Phoenix. I am new to
this, also, and I’m on fire since I returned from the Dallas convention. I
am looking for just this kind of opportunity. I live in west Phoenix and
would LOVE to join such a club. Let’s do it! Please let me know what is
going on and how I can help.
By the way, I met Stacy at the convention (had drinks one night and lunch
another time), and he would be an asset to such an undertaking. A great
guy and an experienced hand at this game.
Write back…
Rodney Mullins
Re: Help Me Understand Land Contract Advantages? - Posted by Stacy (AZ)
Posted by Stacy (AZ) on March 10, 1999 at 19:17:59:
Hello Kieran-
Unfortunately, I’m busy on Tues, but keep me posted in case I can meet at some later time. I have had a few people contact me over the past several months since I’ve been on this board about wanting to start a group, so hopefully they are all reading this. It’s a good idea, move forward!
Stacy
Re: Help Me Understand Land Contract Advantages? - Posted by Craig
Posted by Craig on March 10, 1999 at 17:32:45:
I don’t see any advantage to a buyer using a Land Contract unless the idea and terms are initiated buy the buyer. If you talk to a seller who is offering a Land Contract sale for his home, then he is doing it with the total advantage to him, and that’s the only way he’ll do it. If you don’t go for it someone else will. Half the time the Land Contract sellers will forbid you to record it. Why? Alot of different reasons. Always record it. Most often than not the price offered on a Land Contract is way above Market Value and it will be impossible for you to get enough equity to refinance by the time the 3 year payoff that the sellers require, comes due.
Just make sure the Market Value is in line with the sales price. Get as long as a payoff period as you possibly can, record the contract or a memo of it, and try to set up an escrow for the seller to pay his underlying mortgage. If he does not make those payments and you don’t know about it you are in trouble. Because you will have to catch up the past due amounts in order to assume that loan. Or else face foreclosure. You can probably negotiate all of this with a seller who didn’t come up with the idea of selling on contract. But the one who did knows there are many more buyers that are not as well informed as you.
Re: Cancel the Contract? - Posted by Stacy (AZ)
Posted by Stacy (AZ) on March 10, 1999 at 16:18:19:
Thanks for the help, David. One question, though.
When you use a Land Contract in Texas, did you say that after a certain period you can simply cancel the contract? Does that mean you don’t have to go through foreclosure on a Land Contract? This is assuming a pure Land Contract without the “tenants of sufferage” clause.
Thanks again-
Stacy
Re: I don’t get it - Posted by Reif
Posted by Reif on March 12, 1999 at 20:48:03:
Maybe it’s me, and the vets on the board can correct me.
If you still have legal title, and the contract is not recorded, what’s to prevent you from refinacing?
Question: Do you legally own the property? Yes.
Question: Is there anything written anywhere publicly that disputes it? No.
If you sell with a trust deed, it’s getting recorded, and you don’t hold legal title.
Maybe it’s me that’s wrong, but I thought I could do it.
Reif
Re: Help Me Understand Land Contract Advantages? - Posted by Craig
Posted by Craig on March 11, 1999 at 09:01:33:
That’s great then I guess “he” could pretty much infer that since it’s not advantageous to buy on Contract that it is advantageous to sell that way.
Re: Help Me Understand Land Contract Advantages? - Posted by David Alexander
Posted by David Alexander on March 10, 1999 at 19:30:23:
She’s talking about selling, not buying on a Land Contract.
David Alexander
Re: Cancel the Contract? - Posted by David Alexander
Posted by David Alexander on March 10, 1999 at 19:33:44:
Yes, except that I believe you need that clause, and assumimg that they haven’t built up any major equity and decide to sue you to retain their equity. I still believe it’s better to sell this way. Bear in Mind I haven’t ever foreclosed on one, this is just what I understand.
David Alexander
Re: I’m a Man - Posted by Stacy (AZ)
Posted by Stacy (AZ) on March 10, 1999 at 19:43:42:
That’s right, me as the seller. And just for clarification, I’m a man. Don’t worry, I’m used to it.
Thanks again for your help-
Stacy