Disadvantages Of Using A Land Contract
Most of the disadvantages of land contracts for buyers of property stem from the fact that the vendee (buyer) does not receive the deed to the property at closing. The vendee obtains equitable title, but the vendor (seller) retains legal title. This situation usually exists until the land contract is paid in full. Mortgage loan lenders are highly regulated, mostly to protect buyers/mortgagors. Land contract vendors are not.
A individual seller can be more demanding than a lender. The vendor sometimes feels she has the right to inspect your property. No seller has this right, unless you specifically have granted it in the land contract. A mortgage loan company will never do this.
Some installment loan contracts give the seller an option of making the entire balance due and payable if only ONE payment is missed or is late. Be certain that your contract doesn’t have a clause like this. You wouldn’t want to lose your home simply because you forget and are late making a payment. Repossession procedures are much more strictly regulated for mortgage loans from a commercial lender than for an individual land contract vendor.
***I stress that I am not a lawyer, am not pretending to give legal advice, but am just expressing my opinions.***
The vendor might not wish to allow prepayment. While prepayment penalties are rarely found in mortgage loans anymore, a seller may wish to prevent you from paying off the contract because s/he wants to keep the income stream. Be sure that your land contract does not contain a clause that prevents you from paying the balance in full before the contract expires - you may want to sell, or refinance your contract sale with a loan from a lender.
The biggest reason I stay away from them in our business is that I am not the owner. I enjoy owning.
Well theres my thoughts....Now Go Get A <u>FREE</u> House!!
Tony Severino
| Website: | http://www.TonySeverino.com |
| Phone: | 219-923-3000 |
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