# Land Contract Question



## Barnhouse (Feb 24, 2012)

Howdy-
I am considering entering into a land contract situation shortly, but I'd like to hear from others regarding a few simple questions.

The contract we have is rather simple.
It's a 15 year agreement at 7% interest.
There is an 8 thousand dollar down payment.

The house is a very small *unfinished* off the grid home, a separate garage, tool shed and barn all of which are in very good condition.

The agreement is that the seller is responsible for insurance on all the buildings, pays the property taxes and holds on to the deed until the last payment is received when it will be surrendered to me. 

One question I have is-
Once the down payment is received by the seller and the contract goes into effect, does the seller still have rights as a landlord?
In other words, can I be evicted for any reason other than non-payment or illegal activity on the property? (This is in New York state)
The seller seems to think they have to right to come on to the property and inspected it routinely looking for anything that might "devalue" the property thereby giving them the right to declare me to be in default.


What??????


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## simi-steading (Sep 27, 2012)

Since it's a bond for deed kind of deal, I would imagine yes, they can enter the property under the letter of the law. Even though you have put a down payment on it, they are still the owner.... 

It's not the same as having a mortgage... or owner financing.... You are basically renting the place.... You are not the owner until it is paid off. Under a bond for deed deal the owners name is on the title, not yours... 

The owner still has an interest in the property and it's condition until his name comes off the title.

Don't take my word for it though. Go see a real estate attorney in your state. You are playing with a lot of money and a big contract. Make sure it is legal and in both party's best interest.


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## Barnhouse (Feb 24, 2012)

Thanks for the info. 
I'm not quite clear as to why you say this is not owner financing.
The seller owns the property free and clear, so isn't that owner financing?


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## simi-steading (Sep 27, 2012)

Owner financing is when you do a deal with the owner exactly like you would with a bank. Your name would be put on the title at the time of the sale, and you'd do a closing exactly like you would with a bank. The only recourse the owner would have is if you don't make your payments (with interest), they could then repo the house from you if you defaulted. That is the only tie to the house they have. The owner is the bank... 

A Bond for Deed deal is when you lease or rent the property from the owner and their name remains on the title until the last payment is made. Their interest in the house would be no different than it would be for any other landlord... They still own it under a Bond for Deed... Under a Owner Financing, you own it, but only as long as you make the payments.. The owner holds the lien.... 

With a mortgage or owner financing, you usually have to be like three months out on missed payments before a repossession could be started... With a Bond for Deed, it could be less time.. It depends on the state laws, and or what is in the contract... Under Bond For Deed the contract could also include how you use the property... With owner financing, it won't include how the property is used...


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## simi-steading (Sep 27, 2012)

let me try and simplify this a little more.. I'm not good at explaining things while typing.. 

Owner Financing = You close on the property. You own the property. Your name is on the title. The owner holds the lein against the title. You pay the taxes and upkeep of the property.

Bond for deed = Owner holds the title. Owner pays the taxes and most times upkeep. You make rent or lease payments usually in excess of what typical rent would be. You will then close on the property and have the title transferred to your name AFTER the last payment...

Because of the complexity of Owner Financing, or Bond for Deed, DO NOT sign anything or enter into any agreement until you have gone to see a real estate attorney..... You DO NOT want to do this deal without an attorney.


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## Barnhouse (Feb 24, 2012)

Thank you for clarifying. 
Under our current contract, as I said, the seller is responsible for the insurance and taxes. We've been here almost a year and a half. 
The seller is now trying (before the down payment and the buying phase begins) to shift the responsibility for the buildings and the taxes to me. 
In other words, change the current agreement. 
I have no intention of doing so.
If the seller back out as a result, would they not be in default themselves?

(I really appreciate your guidance, and yes- i will be speaking with an attorney)


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## simi-steading (Sep 27, 2012)

Hhhmm.. so it sounds like you've been renting, and will now be setting up a Bond for Deed deal?

I don't know how the taxes and upkeep would work in your state. Only an attorney would know for sure and give you proper guidance... 

It's not sounding like a Owner Financing deal to me being as he still seems to be claiming interest in the property.

I sure hope you haven't put any money down on this deal in the past.... It almost sounds like you could be in a legal mess already...


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## Barnhouse (Feb 24, 2012)

We have been renting with the option to buy. From day one, a portion of our rent payment has been put aside toward the down payment. We are close to arriving at the agreed down payment amount of $8,000.

But now a MAJOR complication has arisen. The seller's insurance company has canceled their insurance on this property. According to our agreement the owner is responsible for all liability on the property. The seller NOW only has fire insurance on the house and personal liability on the property. None of the other 3 buildings is insured at all. It seems they are panicking now and are trying to shift responsibility for the building and taxes to me ---- WITHOUT transferring the deed. 

Uh....no.


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## simi-steading (Sep 27, 2012)

Uh.. yeah.. time to go see an attorney before you do any more discussions with the owner..


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## Molly Mckee (Jul 8, 2006)

You want to be sure that the current owner cannot get a mortgage on the property. He could let the bank foreclose and you would have no right to the property. In the event of his death how are you protected. You need a lawyer.


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## Barnhouse (Feb 24, 2012)

Yeah, I pretty much figured that. We had every intention of using a lawyer before a sales agreement was signed anyway, but now I understand why the sudden urgency by the seller. 

You have been very helpful. Thank you and God Bless!


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## Barnhouse (Feb 24, 2012)

Molly Mckee said:


> You want to be sure that the current owner cannot get a mortgage on the property. He could let the bank foreclose and you would have no right to the property. In the event of his death how are you protected. You need a lawyer.


Yes certainly. I need to find out how to block the property from being mortaged, or the deed being transferred to someone else.

But none of this protects us from the event that someone with a lawsuit against the seller places a lien on the property either, does it?

Ah, life is such an adventure........ :bored:


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## farmgal (Nov 12, 2005)

I did an owner hold financing as this before. It worked out great. The lawyer cost me 25$ for paperwork, that was 20 years ago...lol Thing is, why are they holding the mortgage? is it in despair? can they not get a mortgage through a lender because of inspections. Make sure you are getting it at a lower price then. Go with a 10 year if at all possible. Goes by fast. 

I dont understand why they are responsible for fire, liability insurances and property taxes on the home and buildings tho. that just seems like they wont make any money if that is the case. Insurances arent cheap. I had to keep all that myself and show proof every year. Are you sure taxes wont be added on your payment? Mine was added into my payment for a few years and after that she signed it all over to me, since she learned to trust me.


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