I'm just about ready to put my house on the market (DH died 1 1/2 yrs. ago and I've been selling farm equipment, finding a smaller house for me near my daughter and getting the old house cleared out (DH was a pack rat) and presentable). The farmer that has been renting the barn for 1 1/2 yrs. said he is interested in the house and property (on 22 acres) but wanted to know if I would be interested in possible a Land Contract. Told him I might be but I'd have to look into it.
What are the pros and cons of a Land Contract?
My "old" house is paid for and appraised for $180,000. After the down payment on the new house, I still owe $76,000. I was hoping to take money from the sale of the old house to pay off the new house. BTW, I'm 66 yrs. old and living on social security.
As in all real estate this can probably vary by state.
In SC a land contract means you hold the deed to the property until it is paid off as opposed to owner financing where the buyer receives the deed to the property at closing.
Either would be set up with a predetermined down payment, interest rate and amortization schedule. Frequently with traditional owner financing there would be a balloon payment due at the end of a set number of years.
Both of these purchase vehicles are frequently used to help facilitate a transaction when it is an unusual property or the buyer is not able to obtain a traditional mortgage.
Definitely something to discuss with your attorney. Unless the buyer is will to make a substantial down payment it will not payoff your new home. They will provide an income stream to supplement your social security.
I am sure I am not thinking of everything but here are some pro and con's.
Pros: You get your selling price PLUS interest; you get a monthly income while still owning the property; it is often faster than a conventional loan; if they buyer defaults you have to home to sell again.
Cons: You do not get all the money at once; if the buyer does not pay you will have to go thru legal things to get them removed; you may have to do extensive repairs before it can be sold again.
There is no right answer. You will have to decide what is right for you. If you do decide to sell on land contract be sure to consult and attorney.
I have another question. If something goes wrong with the septic tank or sump pump or any other thing connected with the house or barns, who pays for this? Or is this something that is worked out in the contract?
You have sold the home (though on a time payment plan) so they are responsible for all maintenance.
I would investigate why the buyer wants this, is your house a difficult sell, if so it might be worth considering.
If not try the open market on the MLS, you will cash out and be done with it.
Check with an real estate attorney or Realtor to see what "land contract" means in your state...
In Florida is like an agreement for Deed. Highly recommend an attorney draw up all the documents including sales contract and closing documents.
The mortgage instrument can be quite flexible to include equipment, offer creative financing i.e. interim principal payments other than monthly payments that can range into the thousands, as well as a balloon payment after whatever number of years you are willing to hold the mortgage . For instance, a 30 yr. amorization with a 5 year balloon - as an example.
You can also draw up the document with additional provisions, right to inspection of property, property to be maintained, tax and insurance yearly receipt or can even escrow taxes and insurance in the payment.
Check him out first, criminal record, credit report, employment etc. Protect yourself.This message has been edited. Last edited by: real estate lady,
indycatCarol, Are you still here? There have been several well-thought-out posts to your originating thread but haven't seen you post back once yet.
I do have knowledge of Land Sale Contracts but will not waste even a moment of my time unless you are willing to invest your time as well. So far, doesn't seem like it. You started this thread and disappeared just as fast so why should I spend time when it appears it was just a frivalous question on your part with no real desire to learn the answer?
Let us know if you are serious....
I'm sorry I didn't get back to this. I had a sick kittie and I finally had to have her put to sleep. Tried to spend as much time with her as possible. Sorry to get your panties all in a ruffle.
indycatCarol, I am so sorry to learn the reason you never posted back and even sorrier about the outcome. You were right to spend as much time as you could with her instead of posting here and you have my sincere condolences for your loss.
I post often on the Pet Board here on this forum and most everyone who has read my posts knows how much I love cats ~ right now I have six indoor "onlies" ranging in age from one year to 19+ years ~ so I understand just how profoundly the illness of one of our fur-babies can disrupt everyday life and, rightly, cause everything else to take a back seat.
However we had no idea what was happening so your last sentence ~ "Sorry to get your panties all in a ruffle" ~ was a bit uncalled for.
I'm sorry, I guess I just thought " but will not waste even a moment of my time unless you are willing to invest your time as well. So far, doesn't seem like it. You started this thread and disappeared just as fast so why should I spend time when it appears it was just a frivalous question on your part with no real desire to learn the answer? " was kind of coming down on me without knowing the reason for my absence.
I spoke with the gentleman today that would like to do a land contract. So I would be very interested in what you have to tell me about it.
Here is my Ethel about a week before I had her put to sleep. She was 9 yrs. old. I still have 6 other cats ranging from 11 yrs. to 15 yrs.
I don't mind coming to work. But that 8 hr. wait to go home is a drag.
indycatCarol, Ethel was such a beautiful cat and I know your heart is hurting... Thanks for posting back; take a deep breath and know that many others are with you. I'm so sorry if I added to your pain ~ I never meant to ~ can we start over? Land Sale Contracts can be quite complicated; I have posted quite a bit about them some time ago so will have to see if you can retrieve them from the archives.
I'll go now to see if it is possible...again, my condolences on Ethel's passing.
Indycat. "land contract" may differ by state or locality. Hold off verbally accepting an offer until your understand leagaleese... don't sign a sales (or lease) agreement before consulting a lawyer who is not affeliated with prospective buyer.This message has been edited. Last edited by: tessa89,
Idaho Resident, the only thing I'm finding in archives are this discussion.
I will try to contact a lawyer tomorrow and see what they have to tell me.
Thank you ALL for your comments.
IndycatCarol, I'm sorry that you weren't able to find a rather long post I posted some years ago about Land Sale Contracts ~ it's still there but it will take time to locate ~ more time than I am willing to invest!
Bottom line if you want to find it, click on my user name and go to my profile, then click on "earlier posts" and search ~ good luck ~ there are 219 pages and counting and I didn't find the one I wrote some time ago that addressed your particular situation - sorry as it really did speak to all of your questions... oh, well.
So you are thinking about entering into a Land Sale Contract with someone who wants to purchase your family farm of 22 acres? First, a disclaimer, as laws vary widely between states, anything I post here needs to be "vetted" by qualified CPA's and attorneys in your jurisdiction but a land sale contract can be mutually beneficial for both buyers and sellers.
A Land Sale Contract simply means that you are holding the deed as just as a bank would do, you will receive the payments PLUS the interest but the property is the buyers property and they are responsible for everything that happens there. They maintain the property, pay all associated costs ~ you are NOT a landlord. However, should they fail to make the payments and decide to walk away, you will be left with what remains behind. So, choose wisely, these agreements can be golden for both sides or a disaster in the making....
It is crucial that you have an attorney well-versed in Land Sale Contracts to assist you along the way; draft the contract to anticipate every contingency and make sure your interests are protected.
Is this the way for you to go? Well, there probably won't be a lump sum at closing so that you can live mortgage-free BUT, instead, you might be gaining an interest-bearing asset that is better than what you might be able to invest on your own.
Up to you ~ sell now for a set price or take a chance on a Land Sale Contract? Decisions, decisions.... I know what I would do ~ the Land Sale Contract ~ but only after fully vetting the buyer. You won't get a lump sum to help buy your new place BUT you will be getting a monthly income that might be more than what you can safely invest ~ your choice, let us know what you decide.
I did speak with the farmer that wants the land contract. In fact, he has been renting my barn for the last 1 1/2 yrs. for some of his equipment. He has also helped me clear out "trash" and metal that was left in the barn after my husband died. We split all the "income" from the metal sales (he hauled it to the recycle place) and other items put in an auction he hauled for me. If I hadn't had 2 other farmers already renting some of the land, he would have rented that also.
I told him I would like to have a beginning lump payment enough to cover paying off my new house and he said that would probably be possible. So hopefully I can get THIS house paid off and get monthly payments.
Thank you for your help on this question.
The prospective farmer sounds like a nice guy helping you clear out scrap metal, however before
quoting prices, check with a Realtor on Comps and Representation and have an attorney draw up the land contract.
I have talked to many sellers over the years who underquoted their sales price to a buyer because of lack of professional representation.
IndycatCarol, Glad you are going to consult with an attorney ~ it is crucial that you engage one to represent your interests, draft the contract and guide you through the process ~ just make sure that the attorney is well-qualified in the area.
Something I didn't mention before ~ if you decide to go with a Land Sale Contract, you REALLY should utilize an escrow holder to hold the documents, receive and disperse the payments and make the required disclosures to the IRS. Here in Idaho, many title insurance companies also act as escrow holders; ask the attorney what is customary in your state.
What documents? Well, usually there would be the following documents, at a minimum, although it might vary by state:
Contract of Sale of Real Property
Memorandum of Sale of Real Property - to be recorded with the county recorder's office so that tax notices are sent to the new buyer (since your name is still listed as the official owner of the property)
Warranty Deed from you to the new owners
Quitclaim Deed from the new owners back to you to be used in the event of a default
You will also need to be vigilant in making sure that insurance is in effect and that taxes are being paid since you will remain the "official" owner of the property until the contract is satisfied.
It's good that the farmer is prepared to make a substantial down payment. Not only so you can buy the new place mortgage-free but, also, because the bigger the down payment, the better the chance that he won't let it go into default. And speaking of default, I would suggest a 30 day period, no longer. Good luck and let us know what you decide to do.
PS. I also agree with REL's comment to consult a realtor so that the price you agree with is fair to both you and the prospective buyer. Classic definition of fair market value is the amount a willing buyer will pay that a willing seller will accept.
...and when they go bad, they can go really, really bad. Took over two years, bankruptcy hearings, lawyers and a cash incentive to get the property back. Good news? We sold it again...for cash!
**Life isn't about waiting for the storm to pass...it's about learning to dance in the rain**
Have you tried to talk with a local expert about this? There are people that train for years to get an expert's title for a reason. With a simple review he could give you a competent reliable advice. I found a custom essay on real estate, only by reading it I realized I learned few interesting already.
Now why do I think that if I click on your link, allie, that it will take me to a commercial site? Hmmm ~ I know! Because the last post on this thread was November of last year and you are resurrecting it in order to post your link?
PS. Numerous previous suggestions to consult an experienced, qualified real estate professional ~ either agent or attorney ~ made that point in previous posts. So why the sudden interest in am inactive thread now? Did you read the "no advertising" prohibition before registering?
|Powered by Social Strata|