I am interested in a home that has a zero balance. There is no mortgage (left to current owner in a Will). The owner is willing to sell under land contract. The home is in Ohio were I live. The home is a sturdy & well built and a good investment. However, the property value in that area is down and larger homes in much better conditions are selling for less then the home I am interested in. The owner wants full price based upon county records, but is willing to over look the down payment for labor earned work (within the home). There had been talk of interest and this is where my question comes in. If the house is paid in full and the owner does not make any payments other then annual taxes and insurance on the property, do they have to charge interest. The possible terms of our agreement is monthly payments for one year and then I finance through a bank after that which will pay the owner off. I am also paying the annual tax and will also have renters insurance. The owner will maintain insurance on the property. We are having some discussion on the monthly payment. The house needs repairs and for it to be appraised in the next year at the highest possible value it will need work. So, this funding will come from me. There has also been mention that the as is condition (all left behind items) can be sold (by my efforts) and paid towards the purchase price. SO there is potential assistance there. Is it unrealistic for me to request a smaller monthly payment (if there has to be interest, it is included) since I am going to purchase in full in one year. The house 90,000 and I would like to pay 600.00 since there is so much work. Please your opinions are appreciated.
Your question is not totally clear, but in regards to whether you should pay interest or not, that is totally negotiable with the seller. However, if you are not paying interest, the seller will still be liable on their taxes for what the IRS considers the interest that they should have collected ("imputed interest").
I would mainly be concerned about whether the house will sell for enough to make any money, since you only have one year. I would try to get a much longer term on the land contract before you have to sell it.
Imputed Interest - see above link
The seller is saving 10% or so to sell to you privately vs an agent.
Use this sheet to demonstrate the cost to sell with an agent.
The seller is making money on minimum imputed interest.
Give the seller the regs about land contracts in OH
The property is worth what an official bank appraisal says it is worth, not some county assessment.
Dont get emotional about this property.
See a Buyer's agent and offer to pay 3% fee for a perfect houses, perfect location land contract property at a good fair price.
I would not "pigeon hole" myself with a 1 year balloon, get 3 years.
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