Home Selling in 53140>Question Details

Sheri Tudjan,  in Kenosha, WI

What is the difference between renting your home vs. someone getting a land contract on it?

Asked by Sheri Tudjan, Kenosha, WI Mon Sep 10, 2012

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6
Sunnie Zemaj’s answer
It depends on your terms you agreed upon,but don't forget,landlord may charge either interest rate ,or higher monthly payment to make it worth his while.Have you looked into getting a mortgage through a lender?
0 votes Thank Flag Link Tue Sep 11, 2012
Sunnie, in this case, I am the seller looking into different options. I could probably rent my place fairly easily given it's location/school district/ 3 bedrooms...but I really don't want to have to be a landlord. I've heard of landcontracts but never truly understood the terms.
Thank you for your reply!
Flag Tue Sep 11, 2012
Hi Sheri,
Your question has been answered all ready but a few things to consider if you are the seller.
If you enter a Land Contract with someone and they stop paying you the mortgage then your only option is foreclosure. This can be a long and expensive process for the seller. Another option if you are the seller, is doing a lease option. You can keep the terms the same as a Land Contract without the risk of a foreclosure. If the tenant does not pay rent, all you have to do is evict. This is a much simpler and less expensive method of removing a non paying tenant. Please call me with any questions at 262-658-1400
0 votes Thank Flag Link Mon Sep 10, 2012
Thank you Theresa! I am the seller and looking at different options if I cannot sell it. Not sure how I feel about having a land contract. I know someone who's condo he did a land contract vs. a lease and he's commented to me before he wishes they would just buy it. So even though he agreed to be the bank on this, the tenants of the land contract could go to the bank to get a loan for the balance of what they owe on the land contract, no? and isn't the land contract typically made up to be much shorter term than a 30 year mortgage?
Flag Tue Sep 11, 2012
Thank you Theresa! I am the seller and looking at different options if I cannot sell it. Not sure how I feel about having a land contract. I know someone who's condo he did a land contract vs. a lease and he's commented to me before he wishes they would just buy it. So even though he agreed to be the bank on this, the tenants of the land contract could go to the bank to get a loan for the balance of what they owe on the land contract, no? and isn't the land contract typically made up to be much shorter term than a 30 year mortgage?
Flag Tue Sep 11, 2012
Thank you Theresa! I am the seller looking into other options. I would only like to rent as a last resort, have heard and know a little about land contracts but wasn't sure of all the details. So, where i was off was the fact that i would be the 'bank' providing the loan for the entire time of the term, say 30 years? I know a couple people in a land contract, the man who is acting as the bank made comments to me before that he wishes they would just buy it already. so, if the land contract sold it for a certain price, they've paid so much, they can go to the bank and get a loan for the balance of the land contract - correct?
Flag Tue Sep 11, 2012
Thank you! I would conclude then that this land contract can be written up with different variations, such as how much down, payment per month and how long they have to complete the purchase...which is where my next queston lies. what would a typical one look like with using made up numbers? the paperwork is written up as sold, but the deed remains with the seller. so buyer agrees to a price of $100,000 with $10,000 down, with payments of $1000 per month for...this is where my question is. this time frame is usually what? 1-5 years? so if you took the 100k minus the 10k down they owe you 90k. for every month they pay $1000 they owe $1000 less of the balance of 90k?

so if after two years of a land contract as stated above, their final purchase price they would need to get from the bank would be $66,000?

what happens when they stop making payments or decide not to buy it after two years? are they entitled to any portion of their payments back if they leave the deal?

thank you again!
0 votes Thank Flag Link Mon Sep 10, 2012
Don't forget to figure in the interest payments per month - Typically this is higher than the bank but this again is at your wish - If buyer stops paying, then he defaults just like with a traditional lender - and traditional lenders NEVER give the downpayment back :) - You will have to get all the details worked out with the buyers beforehand..
Flag Mon Sep 10, 2012
A Land Contract is a purchase. Also called a contract for deed. Title does not go into buyers name until the contract is fulfilled, but it is still a purchase. The buyer has an equity interest is the property until it is deeded to the buyer. Renting is... just renting.
0 votes Thank Flag Link Mon Sep 10, 2012
A land contract is done when the prospective buyer wants to purchase the home but cannot get a loan from a lender. The owner of the home agrees to be the "lender" and an actual offer to purchase is written up as though you are selling the home to the buyer. The buyer pays you, the owner, the mortgage every month. There is normally a huge down payment that goes along with a land contract. If you have any further questions, please feel free to contact me at (262) 960-0468.. Mini Samuel
0 votes Thank Flag Link Mon Sep 10, 2012
The quick and easy answer is that the difference is that someone with a land contract on it is looking to purchase the home at the end of a term of renting it, whereas renting your home is just that - a rental agreement for lease only.

There are many different versions and details that can or would need to be worked out, but the main difference is that the land contract goal is to purchase the home.

Please feel free to contact me to discuss this in more detail or any other questions you may have.

Thanks,

Andy Callahan
Associate Broker
Cove Realty
262-620-0318 (Cell)
callahanhomes@yahoo.com
0 votes Thank Flag Link Mon Sep 10, 2012
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