Land Contracts - Podcast 16

3 Replies

Podcast 16 has been removed because of Dodd Frank legislative issues, etc and I was wondering if someone could tell me what part of the podcast discussion is considered "illegal"?  I wan't able to listen to it before it was replaced.

Specifically are Land Contracts illegal?  I spoke to my real estate attorney and he said there is no problem in selling property in this manner.  I'm not sure if rules vary from state to state but I am located in Iowa.

Background: I own a house that I purchased as a long-term rental however my tenants love the house so much that they are begging to buy it. I'm considering selling it to them on contract. I have a loan at about 80% LTV. I know my banker pretty well and asked "hypothetically" if I were to sell on contract would the bank call the note due and she said "hypothetically", no she could find a work around to allow it. Basically if they continue to receive payments they look the other way. I like my bank! (local portfolio lender)

This is my take on Dodd Frank in general.

1. Lease and Pure option is not dodd frank, 12 months with extensions available.

2. Lease and ROFR is not Dodd Frank, Right to first refusal.

Sample

http://beta.biggerpockets.com/blogs/3/blog_posts/3...

3. Lease and a Contract for Option to purchase

Like a contract for deed, buyer-vendee to be leases then gets the option.

Sample

http://beta.biggerpockets.com/files/user/REISkills...

4. NO MATTER WHAT, get the tenants in question to fill out a 1003 app and have them see a RMLO to give a written opinion of the ATR rule for your tenants.

See my collection of Dood Frank - CFPB resources

http://bundlr.com/b/dodd-frank-safe-act-respa-tila


Brian Gibbons

Brian

Thanks that is really good information. I like ROFR, however do you collect fee up front for giving the ROFR?

Your comments focused on lease-option but what I am talking about is selling via a land contract, and what I mean by that is where the buyer purchases the home, gets the deed  and full ownership while I collect a downpayment and monthly payment similar to a bank.   However in the background I am using the loan I obtained from my bank, plus equity I have in the home, to finance the buyer's purchase.   There is no "option to buy". It is sold and I am the lender.  If they do not perform I foreclose and take back the property.

Why did you have to delete it? You could have simply said you have learned that some of these contracts are not legal in certain States. But if we can expand our thinking and think creatively about financing it would be helpful. Even learning what is illegal is helpful. 

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