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Ok i have a home i bought and paid cash for in 2009. I am wanting to sell on land contract with 7000.00 down, the buyers want me to go thru with all the title work again and the cost is 1500.00 and takes about two or four weeks. 'they want to move in now why would i as the owner with the deed and title insurance have to pay any of this. I feel i dont need it but they do can you help me.
Yes, the "buyers" responsible to pay the fees. You should Not let them move in untill all paperwork and fees are in place.They will be paying the taxes as well, so the contract must be in the Township system.
With a mortgage, you own the property but have the responsibility of paying back the loan. It's still your property. Same with a Land Contract. You own the property but have the responsibility of paying off the contract. When you own the property free and clear, property taxes are simply one of the continued responsibilities that go with ownership.
To take the philosophical angle to the extreme, however, perhaps we should think that we never truly "own" property since we're all going to die. The land will live on, but we need to be good stewards of property while it's under our care.
Lol, that is the sort of jaded attitude I seem to have quite often!
Ok i have a home i bought and paid cash for in 2009. I am wanting to sell on land contract with 7000.00 down, the buyers want me to go thru with all the title work again and the cost is 1500.00 and takes about two or four weeks. 'they want to move in now why would i as the owner with the deed and title insurance have to pay any of this. I feel i dont need it but they do can you help me.
Okay...it appears that you aren't interested in starting a new thread--where you would likely get more responses--so I'll go ahead and comment on what you wrote.
First of all, why do you want to sell on a Land Contract? Interest rates on mortgages are still relatively low so, provided they have good credit, they should be able to get a loan in order to pay you off in full. You will have a number of risks if you sell on a Land Contract (read my previous posts in this thread and elsewhere).
Secondly, if you still choose to sell on a Land Contract, you need to be darn sure that you get a significant down payment so that they will be less likely to abandon the contract. $7,000 down is fine if the house is worth $14,000. It's less attractive if the house is worth substantially more.
What type of terms are being considered for the Land Contract? In Michigan, the maximum allowable interest rate on a personal Land Contract is 11%. What type of interest rate is being proposed in your case? What will be the length of the contract? Will it be amortized over the total number of years in the contract, or will there be a balloon payment due after a certain length of time?
Do you know these people? Have you checked their credit? Have they been involved in any type of lawsuit--particularly dealing with non-payment of rent, bankruptcy, or any type of default on a contract?
As to your specific question about a title policy, it is customary in Michigan for Sellers to pay for title insurance. However, it is still a negotiable item. If you know you have good title, and you have not further encumbered the property since you purchased it, I suggest you simply show the purchaser the title policy from when you purchased the house. You could warrant to them that you have not encumbered the property further. You could tell them that if they want to update the policy then they will have to pay for it. If they have an attorney do a title search, they might find that satisfactory--or you're going to have to come to some type of compromise.
Regardless, NEVER allow a purchaser to move into your house prior to closing. This would be true for a conventional sale or one done on a Land Contract. If they ask to move into the house even prior to executing a Land Contract, that would be a significant red flag!
Above all, make sure to consult with a qualified real estate attorney. It sounds like you are in over your head and that you need professional assistance. It's better to pay a little to an attorney in the beginning, rather than pay a greater amount later on when problems arise with your Land Contract.
You still need to re-think even considering a Land Contract.
Okay...it appears that you aren't interested in starting a new thread--where you would likely get more responses--so I'll go ahead and comment on what you wrote.
First of all, why do you want to sell on a Land Contract? Interest rates on mortgages are still relatively low so, provided they have good credit, they should be able to get a loan in order to pay you off in full. You will have a number of risks if you sell on a Land Contract (read my previous posts in this thread and elsewhere).
Secondly, if you still choose to sell on a Land Contract, you need to be darn sure that you get a significant down payment so that they will be less likely to abandon the contract. $7,000 down is fine if the house is worth $14,000. It's less attractive if the house is worth substantially more.
What type of terms are being considered for the Land Contract? In Michigan, the maximum allowable interest rate on a personal Land Contract is 11%. What type of interest rate is being proposed in your case? What will be the length of the contract? Will it be amortized over the total number of years in the contract, or will there be a balloon payment due after a certain length of time?
Do you know these people? Have you checked their credit? Have they been involved in any type of lawsuit--particularly dealing with non-payment of rent, bankruptcy, or any type of default on a contract?
As to your specific question about a title policy, it is customary in Michigan for Sellers to pay for title insurance. However, it is still a negotiable item. If you know you have good title, and you have not further encumbered the property since you purchased it, I suggest you simply show the purchaser the title policy from when you purchased the house. You could warrant to them that you have not encumbered the property further. You could tell them that if they want to update the policy then they will have to pay for it. If they have an attorney do a title search, they might find that satisfactory--or you're going to have to come to some type of compromise.
Regardless, NEVER allow a purchaser to move into your house prior to closing. This would be true for a conventional sale or one done on a Land Contract. If they ask to move into the house even prior to executing a Land Contract, that would be a significant red flag!
Above all, make sure to consult with a qualified real estate attorney. It sounds like you are in over your head and that you need professional assistance. It's better to pay a little to an attorney in the beginning, rather than pay a greater amount later on when problems arise with your Land Contract.
You still need to re-think even considering a Land Contract.
Your reasioning assumes these " buyers" have the credit. I would guess most land contracts are nothing more than " the seller holding the paper" or Somthing like that in terms. In the case of raw land, like I did, no bank in the world would finance the purchase! Land contracts are almost standard when bare land is involved, or , people pay cash, sometimes thru swaps and LLCs. In my case the land was special " million dollar view" kind, which made financing even tougher.
Do you know these people? Have you checked their credit? Have they been involved in any type of lawsuit--particularly dealing with non-payment of rent, bankruptcy, or any type of default on a contract?
<snip>
You still need to re-think even considering a Land Contract.
Quote:
Originally Posted by darstar
Your reasioning assumes these " buyers" have the credit.
No, I do not assume that in the least. (Please try to read more carefully.) If anything, I would assume that they do not have proper credit--otherwise they probably wouldn't be trying to do a Land Contract when mortgage rates are still rather low.
Of all of the horror stories about what can go wrong with a Land Contract, your story, darstar, is one of the best on what not to do. You didn't get legal advice; you didn't do a title search; and you didn't get title insurance. Your failure to do proper due diligence was a costly mistake and turned out to be a big headache for you. Fortunately, you got it resolved. Hopefully, your bad experience can serve as a warning to others about the perils of Land Contracts. Both Buyers and Sellers can experience serious problems with Land Contracts. That's why I consistently recommend that people get legal advice from a qualified real estate attorney if they wish to consider that route.
Last edited by jackmichigan; 07-03-2013 at 07:40 PM..
I see that you deal in real estate, or I'm assuming that you do- we bought on a land contract a year ago, the reason we did so is because even though our credit score was high enough to get a loan, because of my husband's student loans (he is finishing up his Master's), they counted future payments- but they counted them three times higher than they would have actually been, and in essence, it blew us right out of the house-buying water, so to speak-debt to income ratio.
Another reason we went on a land contract, is that it makes me ill inside to think of paying a bank three times what the actual price of the house is- even though we couldn't get a loan because of the student loans, I have to admit I breathed a heavy sigh of relief when we didn't qualify- yes, it's chancy- definitely. But there are also horror stories out there about people who have bank loans, I'm sure you've heard some of them since you're in real estate (?). We'll end up paying a pretty penny by the time we have it paid off, but nowhere near as much as it would have been through a bank. And we can make bigger payments, as well with no penalties-
It's no easy thing for most people to get a loan for a house anymore. The banks are much tighter lending-wise (glad to see that bail-out went to help people get loans to stimulate the economy....) - all it takes is a few months of not working due to a job loss, which we see every day of the week, in every corner of the country- and the hard work building credit goes right down the tubes. Prices are low right now, people see an opportunity to own a home, whereas maybe it was never feasible before- they pretty much do whatever they need to do in order to make it happen, even if that means the dreaded Land Contract.
I see that you deal in real estate, or I'm assuming that you do- we bought on a land contract a year ago, the reason we did so is because even though our credit score was high enough to get a loan, because of my husband's student loans (he is finishing up his Master's), they counted future payments- but they counted them three times higher than they would have actually been, and in essence, it blew us right out of the house-buying water, so to speak-debt to income ratio.
Another reason we went on a land contract, is that it makes me ill inside to think of paying a bank three times what the actual price of the house is- even though we couldn't get a loan because of the student loans, I have to admit I breathed a heavy sigh of relief when we didn't qualify- yes, it's chancy- definitely. But there are also horror stories out there about people who have bank loans, I'm sure you've heard some of them since you're in real estate (?). We'll end up paying a pretty penny by the time we have it paid off, but nowhere near as much as it would have been through a bank. And we can make bigger payments, as well with no penalties-
It's no easy thing for most people to get a loan for a house anymore. The banks are much tighter lending-wise (glad to see that bail-out went to help people get loans to stimulate the economy....) - all it takes is a few months of not working due to a job loss, which we see every day of the week, in every corner of the country- and the hard work building credit goes right down the tubes. Prices are low right now, people see an opportunity to own a home, whereas maybe it was never feasible before- they pretty much do whatever they need to do in order to make it happen, even if that means the dreaded Land Contract.
Well, rightly or wrongly, the bank considered you too much of a credit risk to give you a loan. While I'm sure that you consider yourself credit-worthy, in general, people who can't qualify for a loan from a bank are more likely to have a problem paying off a Land Contract.
I don't think Land Contracts are to be "dreaded", but people need to take proper precautions when considering one. Since many people simply don't know what they are doing when it comes to real estate (gosh--simply read some of these threads on CD!), it's best for them to get a qualified real estate attorney to handle the contract and to do full due diligence.
The terms of a Land Contract are more negotiable than terms on a bank loan, but anytime you're paying interest on a long-term loan you're increasing the overall cost of the purchase (however, it would require 9.5% on a 30-year loan to triple the overall amount paid for a house). Most of the Land Contracts I have seen have had interest rates higher than conventional bank loans, so the interest paid oftentimes is more, not less. But, usually, fictitious...er, I mean, bank closing costs can be eliminated with a Land Contract so you can save on the front end of the loan. Many bank loans allow pre-payment without penalty; and some Land Contracts include a pre-payment penalty. Each contract is different.
I agree that I would rather not deal with banks at all (and I rarely do). Some banks--with their excessive fees and excessive executive compensation--should be considered criminal enterprises. But when a person secures a bank loan to pay for a property there is a level of oversight that is not there for a private-party Land Contract--even if it's just a title policy for the bank assuring that the "Seller" actually has the right to sell the property.
Buying real estate is one of the biggest purchases one can make. If you don't have significant experience buying real property--and even sometimes when you do--get a qualified real estate attorney to help you. It's better to be safe than sorry.
Oh I agree, it's a risk no matter what a person does- it always scared me to think of going into a huge purchase like that, almost like being "trapped", lol- but we were so tired of paying out 20, 30,000 a year on someone else's mortgage, and just watching it disappear with nothing to show for it except a place to live for that year- very disturbing. On the other hand, I have to admit a LC made me nervous as well- I used to work for a law office downstate, and we would receive plenty of calls from people who bought on a LC to say that they had been paying religiously for a year or two, only to find out that the owner was pocketing the money and the home had gone into foreclosure. Most of the calls came from Detroit and the closely surrounding area, but I doubt that it's exclusive to that area alone, of course.
Due diligence is really important, too... a few years ago, we bought 10 acres from someone in N. MI-my husband had gone to check out the property in the winter (big no-no), it was, predictably, stunning. We bought...then discovered after the thaw that the owner (who owned and lived on the adjacent 10 acres) had been spending years using OUR 10 for a garbage dump- huge holes everywhere, full of garbage. Needless to say, we walked away. Yep, lost some money (not a fortune, though), but it was...well, a lesson learned, lol.
I used to work for a law office downstate, and we would receive plenty of calls from people who bought on a LC to say that they had been paying religiously for a year or two, only to find out that the owner was pocketing the money and the home had gone into foreclosure.
Due diligence is not just about doing physical inspections. A title search should be part of the due diligence for every purchase. Most of the problems purchasers experience with Land Contracts are like you mentioned: they bought from someone who didn't have clear title. A title search would reveal any existing mortgages, other encumbrances or deficiencies in the title. Since most mortgages contain a due-on-sale clause, unscrupulous people may try to hide the sale of the property by doing it on a (unrecorded) Land Contract. People clearly out to commit fraud will pocket the money and not pay on the underlying mortgage, eventually sending the house into foreclosure. Heck--I've heard of sales where the "Seller" had no interest in the property whatsoever. There a lots of potential real estate scams out there and people simply need to be on their toes and work to avoid them.
But it's not just out-and-out fraud which can create problems. Even misunderstandings by the Seller, or unknown title complications, can cause significant problems to purchasers. People just need to take proper precautions.
No, I do not assume that in the least. (Please try to read more carefully.) If anything, I would assume that they do not have proper credit--otherwise they probably wouldn't be trying to do a Land Contract when mortgage rates are still rather low.
Of all of the horror stories about what can go wrong with a Land Contract, your story, darstar, is one of the best on what not to do. You didn't get legal advice; you didn't do a title search; and you didn't get title insurance. Your failure to do proper due diligence was a costly mistake and turned out to be a big headache for you. Fortunately, you got it resolved. Hopefully, your bad experience can serve as a warning to others about the perils of Land Contracts. Both Buyers and Sellers can experience serious problems with Land Contracts. That's why I consistently recommend that people get legal advice from a qualified real estate attorney if they wish to consider that route.
You need to read MY story, ( story's) again too. First you made little comment as why people enter into land contracts. Just to say do not do it, is not an answer. Second I bought the land from a land broker/ client , all legal and above board the best I knew how. I DID have title insurance, I did pay taxes on time for over five years. My problems came when I needed to pay off the 40,000 balance on the land contract. The economy , real estate, was in the toilet, cash was hard to come by. It was Wells Fargo that discovered all the previous owners and their unconventional way of satisfying the sale/ transfer when I applied for a loan to turn all into a mortage . My risky mistake was building a 400,000 house with my retirement savings on property I did not have clear title too. I had to pay all the legal fees in order to convince the seller to except a new deal on what I owed as a loan and not a land contract. I could not get a mortage because of this. It took 3 years to finally find a lender that would except a mortage, mostly, so I could get back my savings outlay.All this would never have happened had there been a better enviorement in the real estate market. It was a case of no loans for no buddy who was their own general contractor and was new to the area ( no credit).
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