Home Buying in Brighton>Question Details

Mjpark, Home Buyer in Glen Burnie, MD

I'm having trouble getting a mortgage for a condo. How can I offer to the seller that I'd like to buy on land contract?

Asked by Mjpark, Glen Burnie, MD Fri Jun 28, 2013

The appraisal came in a lot lower than the agreed price, so I can't get financing. The seller will pay for another appraisal, hoping that the comps were bad in the first one. I am interested in proposing buying on land contract. Do I still have to work my agent and them through the selling agent? Or can I try to contact the seller directly?

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I'm sorry you're having problems obtaining a mortgage and I can understand the appeal of land contract financing. But there are a number of concerns mentioned. You should still work through your agent and the sellers agent. If the agents are able to obtain a copy of the appraisal they can sometimes submit other comps to help support that higher value - if there are any. While the land contract may seem good for you, another consideration has to be from the seller's side - is there a current mortgage still on the property? If there is, you both run a risk. See, the mortgage would have a due-on-sale clause in it. If the lender finds that a sale has taken place (even a land contract sale) they have the ability to accelerate the loan and demand payment in full - right now. If the seller doesn't have the ability to pay the loan off in full, the lender has the ability to begin foreclosure proceedings. If that happens, you run the risk of losing any money that you may have paid along with your interest in the property. If the condo is owned free-and-clear, a land contract may be possible, but only if the seller is not in need of the full amount of their equity. Many sellers would rather have the money now than act as a bank and basically loan you that money. If a land contract is possible (if the seller owns the property free-and-clear), your agent and the seller's agent are the best ones to help put it together, If the seller still owes on a mortgage, selling on a land contract may not be a wise thing to do.
1 vote Thank Flag Link Sat Jun 29, 2013
You need to check your contracts for specific language.
0 votes Thank Flag Link Sat Jun 29, 2013
Please see Bob's answer with regards to mortgage balance and land contracts. If the financing problems stem from the condo development, i.e. too many of them are rented versus owned, an unfinished development or if they are not FHA approved, then you may want to search for a credit union that will finance a non-conforming condo if the land contract won't work.
0 votes Thank Flag Link Sat Jun 29, 2013
Good morning,

To answer your main question, yes you have to work with the agents. Both parties signed an agreement and that listing is assumedly protected for a specified time after the agreements end. Land contracts are tricky - why would either of you not want to use Realtors?

There are a few things that can be done. First, you didn't mention what the deficiency was between the agreed upon sales price and the appraisal. Yes, getting a second appraisal can work. Did either agent pull comps and meet the appraiser at the property? If the deficiency isn't tremendous, will the seller reduce the price some and can you come with some extra money to closing. If you want to do a land contract, you will probably have to put a significant amount of money down, probably as much as the purchase down payment if not more.
0 votes Thank Flag Link Sat Jun 29, 2013
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