Can someone give me a crash course on land contracts? We are trying to sell a house and EVERYONE interested is wanting a land contract. I understand we would essentially be the "bank" they would make payments to us. However, if a real bank won't loan them money, why should we? Definitely would want to do a credit check, right?
We want to get rid of the mortgage payment on this house. A month ago we were going to start renting it, but quickly realized that it would NOT follow the 50% rule. Wouldn't a land contract essentially be like rent, except they will "own" the house and therefore have to pay for all maintenance?
There is a BP podcast on land contracts. Listening to that, and reading the comments, should give you what you need.
It works best when the property is owned free and clear, versus wrapping your existing mortgage with a land contract note, which introduces some due-on-sale clause risk. LC's are a form of owner-financing (more favorable to the seller since you keep the deed until you're paid off). You would do it to sell your house for top dollar (often above market), plus earn an attractive interest rate on the loan (8-10%). Just make sure you get a healthy down payment, preferably 10-15%, but at least $5K, so that your buyer has a stake in things. If the tenant stops paying, you can "evict" them within the first 5 years in OH, rather than having to foreclose. So OH is friendly toward land contracts, and they are popular here. Discuss with a lender/creditor attorney regarding Safe Act/Dodd Frank issues, as seller financing to owner/occupants is now subject to more regulations these days that dictate how you need to put the deal together.
@Lyndsey Keller You really need to speak to your attorney on the CFD. Saying you can evict as a tenant within the first 5 years may not be totally correct as there is also the issue of equity that is established. Any borrower/buyer can take you to a fight, keep that in mind as to their ability (attitude and funds) to hire an attorney.
The CFD is popular, but the old quit claim deed in escrow trick is another issue as it is circumventing foreclosure laws in all states. If you don't occupy the home you will most likely come under the SAFE Act, again, your attorney should guide you.
Attempting to sell a property for significantly more than it's true value is predatory, it should be no more than what other financing would cost and perhaps Realtor's fees. The problem is that you may be setting the buyer up to fail as the property must appraise out for them to get their loan and establish equity. It does increase the marketability of a property, makes it easier for a buyer to buy and broadens the field of buyers who can't qualify today for a variety or reasons for bank/conventional financing.
As to you lending when the bank won't, I suggest you have your buyer (along with you) see a lender to be "pre-qualified" to see how far out the buyer is from qualifying. It could be they have not been in the same line of work for two years, perhaps 6 months short. A good verification from an employer will address the likelihood of continued employment, so there may be little risk involved. OTH, if they had a bankruptcy last year and prior they had years of bad credit, they may not cure the problem in 3 years, a lender may want to see 5 years of good behavior. So, talk to a lender, probably better to see a mortgage originator/broker that can originate seller financed deals.
There is a lot of info here on BP on installment contracts, CFDs, Subject-to and lease-options. I suggest you look at all of them and see what might serve your purpose with a particular buyer than just take a deal as a CFD and run with that. Good Luck.. :)
I completely agree with @Bill Gulley . Seek legal advice from a real estate attorney. There are many legal hurdles.
-- There are many specific laws that are specific to your state that do not apply to others.
-- You will need to have an attorney write the agreement specific to your unique situation. Do NOT use one you downloaded from the Internet or given to you by someone. It may not cover all the legal requirements.
-- Collecting money is also regulated by laws. Again, an attorney can help you understand the requirements and laws.
-- Finally, beware of trying to outsmart the system. Legal advice is the best way to go to come up with what will work best for YOU.
Okay, so land contracts are out the door. Too much legal issues that I don't even want to get into. We are trying to sell this house and we aren't getting anywhere. I'm beyond annoyed at this point. I know the market is down, and apparently anyone around here even possibly interested in it can't get a loan from a bank. We've got it priced higher than what we want out of it (we'd take it), b/c we figured someone will offer lower. It was with a realtor for 6 months and now we're trying to sell it ourselves (going on 1 1/2 months) since the realtor was useless to us. Should we continue to drop the price? Any other methods to get someone to at least make us an offer, or do we just continue to play the waiting game?
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