# Selling with a land contract



## [email protected] (Feb 24, 2005)

It seems that land contracts are only good for the buyer. The seller has his money tied up. 
Are there any advantages to the seller with a land contract? 
Can you make a list of pros and cons for the seller if he chooses to sell by land contract?
Thank you for any help you can give.


----------



## Declan (Jan 18, 2015)

Much would probably depend on your state's laws. It helps the seller theoretically by avoiding a foreclosure in my state because you can just do a quicker and cheaper eviction if they do not pay. The problem is that title companies are increasingly skeptical about insuring title unless the court order specifically voids the contract, which can be harder to get from the court that just checks boxes on the paperwork and fills in blanks on the standard eviction paperwork. It allows you to continue to pay your mortgage while they are buying as long as you payoff by the time they complete paying you, and it defers your recording costs to the back end when they finally pay you off and you have to record the deed.

I am not a fan of them. I think if you are owner financing, you are better off to stay with deed, deed of trust, and note that way if they default, there is a clearly established foreclosure process. In my state, recovering property from a dead beat land sales contract is a less well-defined process even if you have unilateral power to declare a forfeiture and void the contract because they have 5 years to come in and sue you ion the written contract. If not that, then it should be rent with the option to purchase. Some people like to avoid the rent to own because they want a big fat down payment.


----------



## FarmerJoe (Nov 14, 2009)

Here it is easier to take back a property through a land contract than a mortgage.
Yes your money is tied up but you are also earning interest.
There may be income tax benefits. Not on a residence, but a farm I think your tax would be based on yearly payments, not a lump sum.


----------



## ihuntgsps (Mar 10, 2008)

Land contracts are great for the buyer and seller many times.

You must first not immediately need the money you would receive from the sale of the property.

Look at the sale as an investment. If you pick the right buyer (they wont trash the house, skip town, etc.) you will come out ahead most times in my estimation.

Buyers looking for land contracts might have poor credit (lack ability to get a conventional loan at a good interest rate) for many reasons. They are usually more willing to pay above what you could otherwise sell the house for outright and at a higher interest rate (think 5-8% instead of 4% that you might pay for a mortgage with good credit.) 

This nets you more dollars on the sale price and MANY MANY more dollars in earned interest before they have it all paid for.

A $50K house sold on land contract at 5% interest over 15 years = $71,271 total pmnts and interest. at 8% over 15 years =$86,008.

Can you guarantee 5% on any other investment and have the security of knowing the property can be foreclosed if the buyer falls through for any reason? 

Selling outright at $50k and putting that into your 401k account (or other investment) is a gamble and you have no guarantee of having anything of value if the market crashes.

The key is finding a quality buyer. If you can do that I don't see many downsides.


----------



## HomesteadXing (Jul 12, 2010)

[email protected] said:


> It seems that land contracts are only good for the buyer. The seller has his money tied up.
> Are there any advantages to the seller with a land contract?
> Can you make a list of pros and cons for the seller if he chooses to sell by land contract?
> Thank you for any help you can give.



What we do while owner financing, if that's the route you're going on a land contract, is to have conditions in the contract until the land is paid in full. Most of our land is located in unrestricted counties with no zoning, etc. So, we have more flexibility really, and it is true if your counties/states have different laws regarding selling land, etc. 

I can try to give some advice based on my experience in the land investment profession, but I would need a little more info on what you're trying to do, but I'm willing to help!


----------



## Bellyman (Jul 6, 2013)

So what protections are there for the buyer? Could they end up paying faithfully for 10 or 15 or 20 or even 30 years only to find out that the person they've been paying doesn't have clear title to the property and... oops... you're screwed? 

(I don't know, I'm asking.)


----------



## HomesteadXing (Jul 12, 2010)

Bellyman said:


> So what protections are there for the buyer? Could they end up paying faithfully for 10 or 15 or 20 or even 30 years only to find out that the person they've been paying doesn't have clear title to the property and... oops... you're screwed?
> 
> (I don't know, I'm asking.)


Bellyman, the buyer of our lands generally don't go over 15 years to get the land paid off, because within the first 2 years (on houses) and first 3 years on land, they can pay extra if they want and it is taken off the principal balance, as is the down payment and then the monthly payments are amortized out with any interest (some of our lands have interest, some very small lots do not) to where the monthly payment doesn't go up. So if you are paying $250/month then that's what you pay until payoff (unless you want to put down more, then you can without any penalties, same with paying the property off early, etc. No balloons or early payoff penalties.)

We own the land that we sell, which enables Homestead Crossing to be able to owner finance our properties. Buyers can inquire with the county assessor, clerk and recorder (some counties the treasurer) to see if a person or company does own the parcels in which they are selling. We're open to that and will help you obtain the information that you're needing to verify that the lands are owned by Homestead Crossing without issue. We also state what type of Deed you'll receive, whether a Warranty Deed or Special Warranty Deed and that depends on the property. 

For Homestead Crossing personally, we work with buyers, so if you're having a hard time financially we'll work out a scheduled payment plan with the buyer or if they would like to switch to another property of their choosing they can do that as well and not loose any equity!

We take the equity paid up to date and credit it to the principal balance of the new property. If it's under a couple weeks to transfer we generally apply the previous down payment paid towards the new property down payment- which helps folks a lot so they don't have to have another down payment to pay. We would rather see folks happy and thriving on the land they're getting than anything else. 

The properties that we have we have Title Insurance on if they're a Warranty Deed. Special Warranty or Limited Warranty Deeds are what we have obtained from the government or other sources that do not issue Warranty Deeds. In all this time (since 2009) we've never encountered any issues with Limited Warranty Deeds, if you need title insurance on those then usually a Title Company will want you to get a Quit Claim deed to the land which runs around $1,500-2,000+ to do that.

Unlike Real Estate Brokers/Agents Homestead Crossing Inc is a land investment company, which gives us more flexibility with working with folks who want to buy land and they don't have to worry about going to a bank (unless they just want to), etc. No credit checks, but we do have a form that needs filled out as a general security rule. But, for the most part, it's hassle free.

I know I kinda went all around some areas there, but I hope that I answered your question. Let me know if you have more! :banana:


----------



## Outlier (Aug 17, 2016)

HomesteadXing said:


> ....if you need title insurance on those then usually a Title Company will want you to get a Quit Claim deed to the land which runs around $1,500-2,000+ to do that :banana:







Are you referring to a quit claim deed, or the filing of a quiet title lawsuit?


----------

