WORK FOR EQUITY PROGRAM using a Land Contract?? - Posted by Aaron

Posted by Nate Tyler on February 14, 2002 at 20:20:00:

In our contract it clearly states the terms of the sale–specifically what repairs/improvements the buyer is required to do. We’ve got a short term balloon (usually 2-4 months), so that keeps them on their toes. Our weekly walkthroughs and control of the materials budget also keeps everyone on the same page. If they didn’t fufill their end of the deal, the balloon would expire and they obviously wouldn’t have the property in the condition necessary to finish the refinance. After the balloon expired, the contract would be in default, and it would be a matter of going through the process of taking it back.


WORK FOR EQUITY PROGRAM using a Land Contract?? - Posted by Aaron

Posted by Aaron on February 13, 2002 at 16:22:44:

I am going to offer a house I recently bought on a Work-For-Equity program. I have never used a work for equity program to sell a house before but I can see 2 ways of setting this up:

  1. Using either a Lease Option arrangement and discounting the purchase price upon completion of repairs and exercise of the option -OR-
  2. Writing a 1st and 2nd mortgage up front, of which the 2nd mortgage could be forgiven upon completion of repairs

Since I live in Iowa and getting the deed back from a buyer who defaults on land contract is very simple and quick(30 days), I was wondering if anyone has any experience integrating a Work-For-Equity program into a land contract?

Also, if anyone else has experience selling on Work-For-Equity, I would really appreciate any details you could give me, special forms you use, or how you write it into your agreements (L/O’s or mortgages or whatever). You are welcome to email me anything you would be willing to share,

Thank you all.


No problem - Posted by Nate Tyler

Posted by Nate Tyler on February 13, 2002 at 21:41:30:

We’ve done a couple deals where we allowed the buyer to work for some equity.

We even managed to structure a deal to put money into the buyers pocket at closing, still retaining substantial equity.

We create a budget, showing every item that will be replaced or purchased for the property (from light fixtures, toilets, etc., to floor coverings, siding…)

They then have the ability to go to Home Depot, with the itemized budget, and gather SKU numbers and prices for each and every item on the budget. The buyers love the ability to customize the home to their tastes. We put an amount in the budget for “misc.” which is used to cover all the odds and ends (caulk, nails, etc.) that go into a rehab. This also allows them a little extra, in case they happen to go over the budgeted amounts on any items.

They turn in the budget, and in project “phases”, we will call the items in to Home Depot, and they will pick them up. We do weekly walkthroughs with the buyer to make sure they’re on track with the Project timeline, as well as verifying that the materials are being used properly.

We structure the deal based on the ARV, less about 2-3% courtesy discount, less the “labor credit” which is calculated from the amounts those items would cost us to do them.

We sell the property on an unrecorded LSC, and as soon as the project is completed, have them refinance the property. This allows them to not only build sweat equity, but eliminate the need for down payment or closing cost money as well. By structuring their financing as a “refi”, of course they can use the new equity to cover the closing costs, and if their credit is good enough to do a “cash out” refi, they can even pull some cash out at closing.

Pretty cool.


Re: WORK FOR EQUITY PROGRAM using? - Posted by Randy, OH

Posted by Randy, OH on February 13, 2002 at 17:54:09:

I bought a HUD repo for $22,000 that needed a lot of work but was a good solid 3/1 house. I advertised it as rent to own, $500 down, $350 per month,$32,000 total price. I got a lot of applications, so I started talking to them about how much they could put down. Long story short, I ended up with $2,000 down, $30,000 amortized over 15 years on a land contract. The LC must be paid off in 3 years. That’s all there was to it. I never touched the place. Is that a “work for equity program?” Seems like it to me. I got the LC form from but it is a peace of crap. I had to make so many revisions that the form was practically worthless. There are other forms available on the internet. I am sure none could be worse than the one I used. Let me know if you have questions.

Re: No problem - Posted by jr sumner

Posted by jr sumner on February 13, 2002 at 22:48:53:

How do you have your contract set up in case the person does not do the work, and what do you do if the person is not doing the work?