thanks for the responses. I’ve got a good friend I play tennis with who is a real estate attorney. I plan on asking him about specific laws. A commercial lender at a local bank who is a real estate investor on the side suggested this to me. He claims he’s done it on over a dozen houses he’s purchased. He also says that on a land contract you can have the people out in 30 days if they default on the payments as opposed to 90 days on renters. I hope all goes well.
Posted by Scott Shirley on July 18, 2003 at 20:07:04:
I’ve bought a new house and intend on selling my current house. I’ve verbally worked out a deal with a buyer but it was so easy I’m worried I’m missing something. My house appraised for 165K. I’m getting 12K down on a land contract, agreed on a price of 185K on a 3 year balloon, owner financing at 8.5%. I’ll make about $400 a month on the interest rate spread and have the down payment to keep the buyer honest. If they don’t make their payments I’m told I can keep the 12K and have them out of the house in 30 days. Are there any pitfalls in a deal like this I’m overlooking?
Thanks,
Scott
Scott,
The numbers sound good to me.
As far as the mechanics of the deal, with regard to possible default scenarios, this is something that is state specific.
You should have clear state specific language in your contract to cover this.
As Sal indicated below, in some states, you must foreclose to get a defaulted buyer out, unless you can get them to leave voluntarily, and quit claim their interest.
Other states, you can evict, and the criteria for that is rather specific as well.
Talk to a competent local attorney, about all issues, and then get them to draft a contract that not only complies with the letter of the law, but favors you in all parts possible.
I have been doing a lot of reading on this subject. One thing I’ve picked up is removing the buyer is more like a foreclosure (almost) rather than an eviction (buyer has equitable interest).
Best advice that I can give is to do a search on this subject on this site, google search, and consult an attorney.
Let me know what your find out. I am still reasearching this option on my own home.