Land Contracts

Beth@pointseven · #1 06/25/08, 08:41 AM

Would anyone care to share their experiences or knowledge of land contracts.
This would be in Michigan. I've done a google search and really didn't come up with much. Any input would be really appreciated.
Thanks
Beth

Janis Sauncy · #2 06/25/08, 08:53 AM

I bought my home and property on a private contract and have been very happy with how it's worked out....so far.

We went through a title company, who did the title search (of course) and drew up the contract/terms and filed everything with the county. I can't remember what they charged but I'm sure it will vary, anyway.

The seller and I came to our own agreement as to down payment, interest rate, length of contract, etc. and that is what the title company put in the contract.

One thing I did, which I highly recommend, was to find a local bank that does "contract collections." Instead of making the payments directly to the seller, I make the payment to the bank, who then records it as having been made and then cuts and sends a check to the seller. I get a monthly statement and I also get a yearly statement showing interest paid, as does the seller for interest received. This service costs me an additional $5.00 a month (plus an initial set-up fee of $100.00) and is well worth the peace of mind.

I know some people will recommend going through a lawyer who specializes in real estate but I found going through the title company worked well for me.

Also, since this was a "for sale by owner" deal, we didn't have a real estate agent involved, either, so there were no commissions to deal with.

I guess you could contact a local title company and/or attorney to get answers to your questions about the best way to proceed. Once again, what works in one state/county might not be applicable everywhere.

Janis

Windy in Kansas · #3 06/25/08, 09:28 AM

I purchased a rural 16 acre tract on a land contract and it went very well.

It was realtor listed and I arranged the purchase through them. I used my own attorney to draw up the contract using idea I had and those he had. When I presented the contract to the realtor he said it was the best he had ever seen and it was quickly accepted by the seller.

The key is to cover what if situations for both buyer and seller. It was hard for the seller to go wrong by selling to me as I put 40% down on a 5 year contract and paid it off in 3.

Make sure a contract covers who pays what such as surveyor fees, escrow, titles, filing fees, etc.

Whether buying or selling follow financial adviser Bruce Williams advice and ALWAYS use an attorney, preferably a competent one. lol

Maura · #4 06/25/08, 07:50 PM

When I was an assessor I would not give homestead to anyone with a land contract who did not file the contract with the county. This is because I knew of owners who convinced the buyers not to file the land contract with the county in order to keep their property taxes down. "Just send the tax money to me and I will pay the taxes." Then out of the blue the buyers find their property up for tax sale. Always file these papers and pay the taxes yourself directly.

Beth@pointseven · #5 06/26/08, 09:34 AM

I just want to thank you for your replies. Lot of good points I would not have thought of.
We know the people that have this house and I like and respect them alot so I want to make sure we have all bases covered so there are no bad feelings on either side down the road.
Beth

texican · #6 06/26/08, 11:37 AM

Keep your eyes wide open...

If you have a good seller and you're a good buyer, there'd be no problems. There are so many pitfalls, that'll trap you quickly, and you find yourself landless, with a simple mistake or two. Through a bank, you have a little more protection, imho...

Sack full of cash trading hands and a Warranty Deed is the best 'contract'.

I'd have no qualms of doing a land contract, but I'd have my own protections set up (six months of payments always in the bank, reminders to check that taxes were paid, etc.)...

Lazy J · #7 06/26/08, 11:53 AM

I am not a fan of land contracts since you don't actually own the land, in other words the deed, taxes, mortgage are in the sellers name and not yours. If the seller gets misses payments, fails to pay taxes, or goes bankrupt you as the contractor will be out. Go with a mortgage and warranty deed as Texican mentioned to protect yourself and your investment.

Jim

palani · #8 06/26/08, 11:55 AM

As in all land transactions do your own title search back to when the first land patent was issued. A tax sale somewhere in the past might muddy up the chain of title. The seller can only sell what rights he has (possession).

On a land contract the seller should provide a deed when the land is half paid for and revert to a mortgage for his remaining interests. If you wait until the end of the contract for a deed to be produced you might find he has been papering your land with debt which you will now also owe on before you obtain clear title.

Janis Sauncy · #9 06/26/08, 12:03 PM

In my case, the seller owned the property free and clear. He did, however, have a couple of small liens (which showed up on the title search) he had to clear up prior to our being able to close.

I'm two years into it and have had no problems.

Janis

Hoop · #10 06/26/08, 08:04 PM

The guy I work with sold a house via land contract. 3 years of payments, then a balloon payment at the end of 3 years, when (ahem) hopefully the buyers credit has vastly improved.
From the sellers perspective, its beats the heck out of renting. The person living in the house has a vested interest in maintaining things well.

Things got ugly this last week. About 3 weeks ago, a major hailstorm hit the area, pelting homes with baseball sized hail. Roofs, windows, and vinyl siding took it on the chin.
The "buyer" of this house had the insurance appraiser look at the place and they are paying $15,000 towards repairs. The check will be made out to both the "buyer" and the "Seller" of the house.
Turns out the buyer wanted the seller to sign over the check.

The seller isn't about to. The seller wants ALL REPAIRS to be made to the house and won't release any funds for the buyer to spend on personal items (boat/vacation/motorcycle/etc).

The buyer, who had other ideas on how to spend the $15,000, is very peeved. But, the seller wins out, and nearly all funds will be used for repairs.
The seller told me no way does he want a house with a shoddy roof/siding/etc, while the buyer spends $15,000 on other things. Period.

In this particular instance, the seller assumes responsibility for making sure the homeowners insurance premium is paid, and that all monies from insurance claims go back into the house.