Land Contracts Explanation

How Does A Land Contract and Lease Purchase Work?

A Land Contract offers an alternative to traditional bank financing. With a Land Contract the seller is the bank for a predetermined amount of time, usually 1-3 years with the balance due at the end of this period.  Paying off the seller at the pre-determined time is referred to as a refinance, since the seller is the first loan institution that you pay your mortgage to on a monthly basis. This payment is comprised of principal and interest which is based on an amortized period of usually 30 years but can vary. It is best for both parties to the Land Contract to have taxes and insurance included in the monthly payment. An amortization chart is included as part of the real estate transaction so the buyer and seller can see what the balance of the loan is after each payment is made. There are several points to the negotiating of a land contract, and it is important to choose a Realtor that has experience specifically in this area. After negotiations, the closing of a Land contract should be handled by a real estate attorney and recorded at the court house.

What are the benefits of a land contract for you?
1. The buyer gets the interest deduction since technically they own the house.
2. This method of purchase allows the purchaser to sell the home at anytime keeping any accumulated equity and their original down payment.
3. The value of the home most likely increases because there is a delayed bank closing on the property. This makes the loan to value more favorable at the time of the refinance. Paying off the seller at the predetermined time is referred to as a refinance since the seller is the first loan institution on the house.
4. Ownership begins at the execution of the land contract.
 

If you think a Land Contract or Lease Purchase might meet your needs, I would be happy to assist you in determining your best course of action.  We may also find that a straight purchase is the best fit for your situation.
    

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