[supermom0204]

I am considering selling my home via Land Contract and I live in Michigan. I actually purchased this home on a land contract, then refinanced it in my name shortly thereafter. I know what I experienced as a buyer, but that situation was a little different. We purchased it from a seller who had no mortgage, owned the property free and clear, so the issues I may have did not come up then.

My first question is, is it alright to sell on a land contract when I have a mortgage of my own? I think this is ok, but I know from buying on Land Contract, that unless the contract is recorded w. the county, the down payment will not be considered as such when it is finally financed through a bank. We had to record our contract w. the county to make our initial down payment the only down payment. I don't think if I have a mortgage that I could also have a land contract recorded, but I'm not sure.

My next question, who is responsible for the property taxes and insurance? If I am responsible, is this still considered my homestead if I do not purchase any other home, or is this non-homestead? Can I still claim my interest on my mortgage and my property taxes? Can I work it so that I AM the responsible party for the taxes?

Do I have to put the down payment in an escrow account or is it mine to keep? I have heard that whatever is put down is forfeited if there is a breach of contract.

If we decided to do a lease/ purchase instead, is there a maximum amount that I can require as a security deposit?

Any info is helpful, thank you!!!

[merit1sje]

For starters, I don't believe you can sell your home under a land contract to someone else while still holding a mortgage on the home yourself. The mortgage holder is the primary owner of your home and would not allow a third party contractual deal to be made on the same property unless the original mortgage on the home could be satisfied in some way shape or form. The owner gave you a deed to the home and property upon signing of the land contract. You had to register the deed at the county clerks office because it was a transfer of ownership. The land contract agreement was satisfied when you took out a mortgage for the home and paid the owner in full. Without having done that, the owner would retain full rights to the home and property via the land contract. It sounds like mabey your best option might be to sell on a "lease to buy" option. This way you would still retain ownership of the home, recieve the morgage interest deduction for yourself and still be eligible for the Homstead Property Tax Credit. It would be the same as renting but under a lease to buy contract, you could set the terms of the agreement that would benefit both you and the potential buyer. Things such as the amount of a security or good faith deposit to buy. Length of time of agreement. There are all kinds of conditions and contingencies that could be written in. A lawyer versed in real estate contracts could be helpful. Good luck!

[TaxBait]

Originally Posted by merit1sje

....and still be eligible for the Homstead Property Tax Credit...

Nope.

[supermom0204]

Originally Posted by merit1sje

For starters, I don't believe you can sell your home under a land contract to someone else while still holding a mortgage on the home yourself. The mortgage holder is the primary owner of your home and would not allow a third party contractual deal to be made on the same property unless the original mortgage on the home could be satisfied in some way shape or form. The owner gave you a deed to the home and property upon signing of the land contract. You had to register the deed at the county clerks office because it was a transfer of ownership. The land contract agreement was satisfied when you took out a mortgage for the home and paid the owner in full. Without having done that, the owner would retain full rights to the home and property via the land contract. It sounds like mabey your best option might be to sell on a "lease to buy" option. This way you would still retain ownership of the home, recieve the morgage interest deduction for yourself and still be eligible for the Homstead Property Tax Credit. It would be the same as renting but under a lease to buy contract, you could set the terms of the agreement that would benefit both you and the potential buyer. Things such as the amount of a security or good faith deposit to buy. Length of time of agreement. There are all kinds of conditions and contingencies that could be written in. A lawyer versed in real estate contracts could be helpful. Good luck!

We didn't get the deed when we signed the land contract I don't believe. I think that was after it was financed through a bank. I do lean more toward the lease/purchase, but I guess I'm just trying to educate myself on all of the differences and parameters of each. Thanks for your help!

[jeeg]

When we bought our first home in Greenville, we had a notarized agreement (family friend so wasn't worried). We paid the taxes, home repairs, etc. just as if we were financed through the bank. After we had enough equity worked up we refinanced with a conventional mortgage.
You CAN do a land contract while holding a mortgage, for peace of mind for everyone involved I would find a title office that will handle it all for you (for an additional fee paid by the buyer).
They would take the payment from the buyer, make the mortgage payment, and send any extra on to you (minus their fee of course).

[dkrogers22]

Most contacts through the bank has a due on sale clause, rent with the option to buy, as long as there their there renting until they buy through a bank.

[dori36]

Originally Posted by dkrogers22

Most contacts through the bank has a due on sale clause, rent with the option to buy, as long as there their there renting until they buy through a bank.

That's correct. Read your mortgage contract carefully and you'll no doubt find that if you sell the property, even on a land contract, you will have to pay off the bank - period. If you lease it/rent it, you will no longer be able to pay homestead taxes on it as it is no longer your principle residence. You'll be taxed on it as a rental property. You have to live in it as your home to qualify for homestead tax exemption. And as broke as Michigan is, they will definitely catch you. If it takes them a year or so to figure it out, they'll back charge you for the taxes you avoided by pretending to still use it as your main residence.

[supermom0204]

Originally Posted by dori36

That's correct. Read your mortgage contract carefully and you'll no doubt find that if you sell the property, even on a land contract, you will have to pay off the bank - period. If you lease it/rent it, you will no longer be able to pay homestead taxes on it as it is no longer your principle residence. You'll be taxed on it as a rental property. You have to live in it as your home to qualify for homestead tax exemption. And as broke as Michigan is, they will definitely catch you. If it takes them a year or so to figure it out, they'll back charge you for the taxes you avoided by pretending to still use it as your main residence.

Hey thanks for the info, I honestly wasn't really sure how the homestead tax exemption worked, if it was just a 1st home ownership thing or if you had to live there (for instance if we rented instead of buying another home). This was very helpful. We are still on the fence on this, but I would say we are leaning toward the lease/purchase plan. We really just want to reduce our expenses, even if it's by 200 a month. We are holding steady right now, but we are really wanting to get our monthly budget down to a minimal amount and just looking at all options. I would rather be prepared than find ourselves sunk if one of us lost a job or something. Right now, neither of our jobs have a guarantee of that, and we have been advised as such We are looking at every option that would set us up so that the hit wouldn't be quite as painful. And, if everything works out alright, then we're just that much better off in the long run.

Anyway, thanks for the answers everyone!

[rainbowlady]

I am a buyer looking for a home to buy on land contract in Michigan.

Do you have any hints on what sellers are looking for in buyers that approach them for land contracts?

We have excellent credit, and a substantial downpayment, but prefer a land contract.

It seems we are unusual in this respect. Realtors are not used to it either.

Should I just keep looking? Will realtors help me in this, or is it totally out of their ballgame?

Is this something you are doing privately thru people you know, or how did you find a buyer?

It seems the fsbo homes are priced a little high in the area I want, and the real estate ones are lower.

Thx!

Sue

[supermom0204]

Originally Posted by rainbowlady

I am a buyer looking for a home to buy on land contract in Michigan.

Do you have any hints on what sellers are looking for in buyers that approach them for land contracts?

We have excellent credit, and a substantial downpayment, but prefer a land contract.

It seems we are unusual in this respect. Realtors are not used to it either.

Should I just keep looking? Will realtors help me in this, or is it totally out of their ballgame?

Is this something you are doing privately thru people you know, or how did you find a buyer?

It seems the fsbo homes are priced a little high in the area I want, and the real estate ones are lower.

Thx!

Sue

FUNNY!!!! I was just reading your post! LOL! We were considering selling land contract simply because it seemed like it may attract more potential buyers who may have that one little thing preventing them from getting a traditional mortgage, and actually might increase our chances of selling and single out our property in a town and street where EVERY other house is for sale. After getting some answers on here, I don't think it will be an option since we have a mortgage, and unfortunately a lot of other sellers do as well. We purchased this home on a land contract from the man who built the home, but he owed no money on it so it was very simple. I think a seller is most comfortable with a land contract if there is a substantial amount of money put down and acceptable terms for all. I was reading some of your responses to your post, and just for your info, we did have our land contract recorded with the register of deeds, so we were considered the owners and the seller the "lein holder" just as with a bank mortgage. We did have all the tax advantages and equity that anyone in a mortgage would have. We just claimed the interest under the ssn of the seller, and he claimed it as income. Really my best advice is just to keep looking for a seller who perhaps does not have a mortgage, possibly someone older who has had time to pay off the house and is just looking to downsize for retirement or whatever. Maybe get a buyers agent who can LOOK for sellers willing to go land contract. OR look for a contractor who flips houses. We have one in our town that sells most of his flips on land contract. Then you get a completely updated home too. Good luck and I hope you find what you're looking for!