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Northpaw, Home Seller in Fort Wayne, IN

What are pros and cons to do a land contract with a renter with option to buy?

Asked by Northpaw, Fort Wayne, IN Wed Jun 8, 2011

My parents passed away and left me a house to sell. And I have no luck selling it in almost one year now and am approached with a prosopal to do a land contract with a potential renter with option to buy later. The renter would put down some money upfront. I don't know much about the land contract issue. Is it good for me in long run?

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If the sale price is good for you a land contract is a very good option, assuming you negotiate length of time terms that you can live with. I would try and negotiate something definitive on the purchase, not an option, unless you have an option to sell at any time as well. I recommend getting enough money down to offset the possibility of a foreclose, $6,500. is a decent amount. Also a fair interest rate to both parties. You have 3 options for drawing up purchase agreement, disclosures, etct 1) contact a RE broker 2) an attorney 3) doing it yourself. And then last but not least hire an attorney for legal advise and to get a solid land contract in place, I cannot quote fees for them, but this should not exceed $500.00 for something fairly straight foward.

Note:I specialize in home's that no one else can sell!

Have a nice day!
Alan Boyle, MBA
(260) 609-5993
0 votes Thank Flag Link Thu Jun 9, 2011
In addendum to what Ed states, keep in mind that in a LAND CONTRACT there is a TITLE TRANSFER to the Buyer. This means that if the Buyer defaults, you will have to FORECLOSE on the him or her. This can be a time consuming process and a drain on resources. In a LEASE-TO-OWN deal, a Buyer who defaults will simply have to be EVICTED... more timely, less expensive. It is for this reason that I normally advise my clients to work a LEASE-TO-OWN deal instead of LAND CONTRACT.
0 votes Thank Flag Link Thu Jun 9, 2011
If you do a land contract, you have sold it. Buyer gives you a down payment and monthly payments
with interest. When paid in full he gets a deed from seller. You can put a balloon clause in the contract which
calls for the buyer to pay off or refinance within a certain period of time, for example 2 or 3 years.
Interest rate is always more than a bank would charge. It can be a good solution for you if the buyer is
good. Don't do it without a REALTOR or attorney. Check buyer's credit before committing to a land contract.
Renting with an option to buy is totally different. This is not a sale and the renter has no obligation to buy.
If you rent, it gives you an income. Adding an option to buy limits your ability to sell until the option period runs out. If you include an option to buy, make it for a limited period of time.
Web Reference: http://www.ftwaynehomes.com
0 votes Thank Flag Link Wed Jun 8, 2011
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