How does insurance work on Land Contract?

Question

Hello all,

Happy New Year!

I am negotiating a Land Contract with a seller. The seller owns 3 properties and the seller and I have agreed on the purchase price, down payment, rate of interest, etc.

The one thing that I am not sure about is how does the insurance work on a land contract? The seller has mortgage on all 3 of the properties and is required to pay taxes and insurance through an escrow with the mortgage payment.

Do I just tell the seller to add me as an insured party to her existing mortgage?

What are my options as far as insurance is concerned?

Thanks in advance for all your help!

Steve Babiak · Answer

A land contract can be set up to be a wrap, or, in other words, a wrap can be implemented via a land contract.

David Beard · Answer

I'm familiar with those doing land contracts (in Ohio) to buy properties, while keeping the seller's existing mortage intact.  Normally they set it up as a 7-10 year term, then market the property to a buyer under some arrangement (LO, land contract, not sure?) where they'll try to get the buyer in position to refinance within 2-3 years, to capture their main profit, while enjoying some positive cash flow each month.  So a sandwich technique.  However, it starts with a land contract purchase on mortgage property.

George P. · Answer

Don't bother yourself with insurance, cause I don't think your seller can sell mortgaged properties on land contract. Sub2 or wraparound is the way to go. IMO