Land Contract

[walkthaplank]

I didn't realize there were lots of them out there. It does seem like a good idea if I can just find one I like. My present home is nice but I am upside down about 30K or more and if I could find a nice house with an option to buy it may be a good idea to release my present home.

May be I will call a few realtors tomorrow.

I've never looked at a home in the terms of a short term investment. Being upside down in a mortgage now isn't bad if you plan on being there for the next 15 or so years. I plan on being in my house for at least the next 20 years barring any major problems. Being upside down NOW and with the credit problems we've run into is actually going to help me in the longer term.

The payment for my first mortgage along with my deductions puts me under the median income, the only reason I am filing CH13 is to strip my second mortgage. I will end up paying less to my total BK plan than just the payment I have been making on the second. In 5 years I'll be done, hopefully the economy will be righting itself and the market will start creeping upward. If the market stays down for longer than that, well at least I am living somewhere where I am paying towards my future rather than towards somebody else's AND able to write off the mortgage interest. What I have been seeing in my area is that housing sales are WAAAYY down and along with that home values are way down, however the rental market is booming. For me to rent a house equivilent to the home I own (rent from the bank) now would be pretty close to a wash, even worse once you lose the tax benefits of home ownership.

Just something to think about.

As far as a doing a land contract, isn't that really home ownership responsibility without the benefits of home ownership? It seems very risky, potentially expensive with a slim chance of an upside. Maybe I'm missing something, it's been known to happen.

[spearmint]

Well, I talked to two realtors in the last couple of days. Both said that you would need 10-20% down for a land contract in Michigan right now even if there were any available and they said there are very, very few and that the ones that are available would be in "unsavoury" areas!

[spearmint]

My question, if the owner sold the house on a L.C. and then defaulted in BK. Would the buyer (L.C) be able to put a lein on the property? I don't know much about leins etc? If the house did end up in BK you may be able to finance it for cheaper than what it was sold to you.

bump

[lrjax05]

with land contracts or owner financing, who pays the property taxes? Is that tax deductible to the renter or the buyer?

[StartingOver08]

It is negotiated in the contract, but typically the buyer gets to pay the taxes and deduct the taxes

[Minnymouth]

Buying on land contract (or same type document):

1. ALWAYS RECORD the document at the Court House just like a regular deed. This protects you in the future. The property CANNOT be sold without going thru you first.(In case of divorce, estate settlement, division of property, BK, etc). A RECORDED DOCUMENT is as legal and binding as any mortgage with a mortgage company.
2. You landlord cannot break the deed just because he changes his mind in the future. He has to have a legal reason for trying to get you out and take the property back over (such as non-payment, etc). Then he has to go thru "foreclosure" process, just like the mortgage companies have too.
3. The buyer pays all payments, insurance, property taxes and maintains upkeep on the property. The buyer gets the benefits on his taxes...... not the person selling the property. (Remember the Land/Contract document HAS TO BE A RECORDED ONE).
4. If the seller files BK - and the bank holds a mortgage note -the Trustee has to file suit against the buyer in order to take the property (but normally doesn't).... the buyer usually works out a refinance thru the original mortgage company at a lower interest rate. Most homes are still financed thru mortgage companies. The buyer on the land contract has first option on whether to refinance with the mortgage company or not.
5. If the seller files BK - and he OWNS the property outright - the Trustee still has to file suit against the buyer to get control of the property. But buyer still has the option to refinance with a mortgage/bank to satisfy the Trustee. (Thus the Trustee does not have to force foreclosure and file lawsuits against the buyer, and eliminates the Trustee auctioning off property.)

Many states follow the same procedures as above when it comes to landowners selling under "land contracts", as long as the deed is recorded at the Courthouse (REMEMBER - IT MUST BE RECORDED).

I purchased my original home back(seized by Trustee in BK) on a "land contract" like above. Then a year later REFINANCED and got out from under the Land Contract.

Many "land contracts" are often "no money down".....

Just make sure all your documents are in order and RECORDED. This protects you in the future in your investment.

Minny

[Mi Bankruptcy]

Thanks Minny for your very detailed explanation. I figured their were some protections for the buyer. I definitely would have filed it as a legal document. I am sure if you take the LC to an attorney you would be told to make sure you file it.

[Minnymouth]

Regarding "land contracts", the seller often charges a much higher interest rate (often 10 - 12%) then a bank or mortgage company will.

But unfortunately you cannot refinance it for at least 2 years and some states 3 years.

Keep good receipts of your payments etc. Also since you basically already own it, it's considered a refinance and not a new purchase when you go to a bank or a mortgage company. So there shouldn't be any "downpayment" required when you do.

Just make sure your contracts are good, written correctly, and recorded.

Hope all this helps folks who are considering "land contracts".

[StartingOver08]

Make sure the land contract is written by a good real estate attorney.