They are not the same in essence in structuring what has been proposed to you.
A Land Contract (aka/ Contract For Deed) is a contract between the buyer and a private seller of a property, wherein the seller holds the title or deed to the property until all agreed upon payments have been made in full.
One of the "few other simple, canned RE forms" that your REA has is a land contract. Trust me, as a former agent I can assure you that if the majority of real estate agents are considered competent to fill out this simple form, your average person will also have no trouble with it.
A land contract does not even require escrow or filing, actually, although this can be done. It is a simple contract between the owner of a property and the potential buyer, stating that if the buyer pays x number of dollars down and x dollars per month for x number of months, and perhaps a balloon at the end, then the owner will give a deed to the property to the buyer. Generally the buyer is permitted to occupy the property during the term of the contract, but not necessarily. It is actually very similar to a purchase money mortgage but title is held by the current owner until the contract is satisfied rather than given to the buyer and then encumbered by a mortgage.
The problem with it is that the seller still owns the land, and so is still liable for it. Generally the buyer is required to pay for insurance on the property and property taxes in addition to the purchase amount, even though the buyer does not in fact own the property until it is paid for. One benefit is that as the buyer does not have title, the buyer cannot sell the property and walk on the balance owed.
Obviously it would be better to have someone pay you cash for your property, but people without the cash or credit can be good buyers also, and may be willing to pay a premium. A land contract is a viable option for owner financing- in my opinion better for the seller than a purchase money mortgage.
Chris
In a contract for deed, you mentioned the insurance. Could the seller keep their insurance in place to ensure it is covered? I am thinking of doing a contract for deed on one of my properties, and need to know more about it. Can you suggest any books that would have the mechanics of the process?
thanks
The downside of including closing costs in the purchase price is the increased tax liability. Paying property taxes on this amount for as long as you own the property, as well as finance costs, could make this the most expensive money you ever borrowed.
jmart2221,
They are not the same in essence in structuring what has been proposed to you.
A Land Contract (aka/ Contract For Deed) is a contract between the buyer and a private seller of a property, wherein the seller holds the title or deed to the property until all agreed upon payments have been made in full.
John $Cash$ Locke
[addsig]
Thanks for your advice.
One of the "few other simple, canned RE forms" that your REA has is a land contract. Trust me, as a former agent I can assure you that if the majority of real estate agents are considered competent to fill out this simple form, your average person will also have no trouble with it.
A land contract does not even require escrow or filing, actually, although this can be done. It is a simple contract between the owner of a property and the potential buyer, stating that if the buyer pays x number of dollars down and x dollars per month for x number of months, and perhaps a balloon at the end, then the owner will give a deed to the property to the buyer. Generally the buyer is permitted to occupy the property during the term of the contract, but not necessarily. It is actually very similar to a purchase money mortgage but title is held by the current owner until the contract is satisfied rather than given to the buyer and then encumbered by a mortgage.
The problem with it is that the seller still owns the land, and so is still liable for it. Generally the buyer is required to pay for insurance on the property and property taxes in addition to the purchase amount, even though the buyer does not in fact own the property until it is paid for. One benefit is that as the buyer does not have title, the buyer cannot sell the property and walk on the balance owed.
Obviously it would be better to have someone pay you cash for your property, but people without the cash or credit can be good buyers also, and may be willing to pay a premium. A land contract is a viable option for owner financing- in my opinion better for the seller than a purchase money mortgage.
Chris
Chris
In a contract for deed, you mentioned the insurance. Could the seller keep their insurance in place to ensure it is covered? I am thinking of doing a contract for deed on one of my properties, and need to know more about it. Can you suggest any books that would have the mechanics of the process?
thanks
Closing costs are not able to be financed. The 5k must come directly out of their pocket or out of your proceeds.
The downside of including closing costs in the purchase price is the increased tax liability. Paying property taxes on this amount for as long as you own the property, as well as finance costs, could make this the most expensive money you ever borrowed.
Chris