Should I Buy With A Land Contract?
December 4th, 2008 By Peter G. Miller
A “land contract– — also known as a “contract for deed” or “agreement for sale” — is a way to buy property on an installment basis. You make payments and then after some or all payments are made you get title.
This form of buying raises a number of concerns:
- Suppose you miss just one payment — do you lose your entire investment?
- Suppose the place burns down — who gets the insurance money?
- Is a land contract being used in an effort to avoid a due-on-sale clause with an existing loan? If yes, what happens if the lender calls the mortgage?
- What if the owner does not pay the mortgage or property taxes and the place is foreclosed? What happens to the equity interest held by the land contract purchaser?
Installment contracts are often used with timeshare sales. The logic is that if someone does not make a payment or pay maintenance it’s easy for the developer to re-sell the timeshare.
Buyers are best-served by holding title and getting a mortgage. If you need to buy with a land contract, at least have a real estate attorney review the paperwork before signing anything.
————————
Syndicated originally by Content That Works and posted with permission.
© Copyright 