What exactly is a land contract and how does it differ from a sale with owner financing? Thanks.

Asked by Coredertoit, Mi-Wuk Village, CA Sat Sep 17, 2011

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Suzanne OBri…, Agent, Grosse Pointe Farms, MI
Mon Sep 19, 2011
A land contract is where the owner holds back a mortgage for the portion of what is owed to them and allows you to pay them in installments vs. cashing them out with a traditional mortgage. They are very hard to come by as most owners still owe a mortgage and a tradiitonal lender will usually not allow them to sell without paying the mortgage off, which means they have to get full payment when you buy.
1 vote
Sheila Abrams, Agent, DETROIT, MI
Sat Sep 17, 2011
A Land Contract is an agreement between the buyer and seller. No bank is involved. The buyer is required to give the seller a down payment and the remaining balance is paid in monthly installments. Seller and buyer agree on purchase price, down payments, terms (years/months), interest rate, who pays taxes and insurance. Because the seller still holds title until the balance is paid, some sellers may opt to pay the taxes and insurance themselves to ensure the payment is made. However, some sellers may let the buyers pay those on their behalf, it is totally what the seller and buyer agree on. A land contract can be especially beneficial to buyers with less than stellar credit, because their credit score is not a factor! It is also beneficial to a seller to gain occupancy in their property that may have gone vacant waiting for a loan qualified buyer. It is also great way for sellers to compete with the low prices of the foreclosed homes. A buyer may not have enough cash to purchase an REO foreclosure outright, but may have enough for a down payment on a land contract. It can be a win-win situation for all.

Sheila Abrams-James,Realtor
A I Realty
313.535.7711
1 vote
goldenflower…, , Detroit, MI
Wed Feb 27, 2013
what is 9GRANDFATHERING) MEAN WHEN YOU ARE TRYING TO BUY LAND AND YOUR REAL-STATE AGENT SAYS IT.
0 votes
Suzanne OBri…, Agent, Grosse Pointe Farms, MI
Mon Sep 19, 2011
A land contract is where the owner holds back a mortgage for the portion of what is owed to them and allows you to pay them in installments vs. cashing them out with a traditional mortgage. They are very hard to come by as most owners still owe a mortgage and a tradiitonal lender will usually not allow them to sell without paying the mortgage off, which means they have to get full payment when you buy.
0 votes
Coredertoit, Home Buyer, Mi-Wuk Village, CA
Sat Sep 17, 2011
What advantage or disadvantage does a land contract have over selling to a buyer with owner financing. Is it just a matter of whose name the title is in?
0 votes
Derek Bauer, Agent, South Lyon, MI
Sat Sep 17, 2011
IF the land contract buyer is purchasing the home as their primary residence, absolutely they should have a homesteaded tax rate! Even if part of your negotiations is that you as the seller escrow for their taxes and they add those to your monthly P&I payments and you personally pay them on their behalf, then they would be homesteaded and the buyer claim them on the taxes. You could not also claim them as being paid by you, as you were essentially the escrow outlet for them.

For tax and legal advice, you need to seek out experts in that area. Real estate professionals can't and don't provide legal advice. Be sure to seek counsel from professionals in those areas.
Web Reference:  http://DoorToDreams.com
0 votes
Coredertoit, Home Buyer, Mi-Wuk Village, CA
Sat Sep 17, 2011
Karen,
I, the seller as a non owner-occupant would have a different tax rate as an owner occupant......so
can the purchaser of a land contract get homestead taxes even though they do not hold title?
0 votes
Karen Paytas, Agent, Clinton Twp, MI
Sat Sep 17, 2011
The taxes are the responsibility of the buyer. How they are paid is determined in the land contract terms. They can either be paid montly (1/12) or annually with proof to seller that they are paid. It's the same with the homeowners insurance.

Karen Paytas, GRI, CMS
Realtor
Real Living Kee Realty
586-709-8465
kpaytas@mirealsource.com
0 votes
Coredertoit, Home Buyer, Mi-Wuk Village, CA
Sat Sep 17, 2011
Who is responsible for the taxes?....Buyer or seller?
0 votes
Bruce D. Boyd, Agent, Shelby Twp, MI
Sat Sep 17, 2011
A land contract is seller finanacing. The buyer makes a down payment and the seller holds the title until it is paid off as security. The terms are negotiable between the buyer and seller unlike a bank. Some contracts pay themselves off and others have a balloon payment. You would then have to get a mortgage to pay off the seller. The closing costs are also very limited compared to a mortgage.
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