Land Contract/Contract For Deed/LO?
I'm very unclear about this whole issue. Here's the deal. I just bought a house off these people that have put a contract on another house but they cannot qualify for a loan even with $30k. I can buy the house for them, take $25k fee (leave them $5k to move in, furniture, whatever) they make mortgage payments, maintenance, everything. I will help them with their credit and keep records of their payments or use an LSC, then they will actually purchase the house in a year or two. I want to do a land contract, or something,but I'm very unclear how they work or which one I do. Furthermore, what is the difference between that and a lease option? Can anyone give me any guidance on this issue?
Thanks
DaShow -
Land Contract and Contract for deed are different names for the same thing. In this scenario, you would still hold the deed to the property, and they would make payments to you according to the terms of the contract. Once the contract terms are fulfilled, you promised to sign the deed over to them. This is a very common thing to do. The contract is often recorded at the County Courthouse.
With a lease option, you have a contract where they agree to lease the the property from you for a period of time. They also have an option to buy the place for a specified price.
In both cases, you can have financing outstanding on the place during the term of the agreement. In both cases, they usually make higher payments than they would if they were renting the place. And in both cases, they generally take over all maintenance of the place.
Functionally , both mechanisms fill the same niche. I guess that the main difference is whether or not you might have to foreclose on the property in case of them defaulting on the contract. As I am a recent California transplant to Indiana, I am puzzled by one thing... In California, it seemed that L/O was popular. There wasn't much talk of a contract for deed. Out here in Indiana, a contract for deed seems to be very common. Maybe that's due to more people not qualifying for loans out here, but I suspect it has something to do with the legalities surrounding contracts and lease options that's different between the states. Anybody out there that can help enlighten me on this one?
-Jeff