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Old 01-29-2012, 10:18 AM
 
455 posts, read 721,684 times
Reputation: 591

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for a house or condo 2 points above published bank motgage rate 6-7 %
im thinking
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Old 01-29-2012, 10:51 AM
 
Location: On the brink of WWIII
21,090 posts, read 27,311,208 times
Reputation: 7812
Now days with the lack of credit all I have seen is 12%--maybe less with more than 40% down. We just bought a place and had 50% and seller would not go less than 12%.
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Old 02-04-2012, 09:32 PM
 
5 posts, read 36,513 times
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Mine was 5% with 10% down
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Old 02-05-2012, 07:29 AM
 
8,301 posts, read 11,006,633 times
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If you're selling on a Land Contract, and you want the person to refinance as soon as possible, you should probably try to charge the highest rate (or close to it) that is allowed under your state law for personal land contracts. (In Michigan, I think the maximum allowable rate is still 11%.) That will give them more of an incentive to refinance, so you can cash out. Of course, the interest rate is negotiable, so a purchaser would prefer a lower rate. In this day and age, since interest rates are so low, I could certainly see going with a Land Contract rate of 6% to 9%.

Land Contracts may be considered a way to get steady income, but you should consider all of the downsides of retaining title to the property while it is under contract. They could quit paying on the Land Contract and you could get stuck dealing with evicting them and foreclosing. If they don't pay the taxes, that becomes your responsiblity to make sure the property isn't lost for back taxes. If they don't pay for insurance and the house burns down, your loss, too...or if they just trash the property. I have sold property on Land Contract and it has worked out fine since they refinanced within a few years. I have also had problematic Land Contracts, and I've heard plenty of horror stories. If you do sell on Land Contract, make sure to keep on top of the situation and don't allow people to lapse on their responsibilities!
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Old 02-14-2012, 07:24 AM
 
Location: East Orlando
26 posts, read 128,236 times
Reputation: 16
When I sold my house on land contract I wanted the purchaser to refi as quickly as possible. I'm charging 10% interest (20 year amortization) on a 5-year balloon after they put 20% down.
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Old 01-30-2013, 04:37 PM
 
4 posts, read 57,975 times
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What is the lowest rate I can charge on a land contract with the balance being $140,000 spread out over approximately 17 years can I do 1% 2% 3% what can I get away with I want to go as low as I can
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Old 01-30-2013, 04:42 PM
 
4 posts, read 57,975 times
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Can I do land contract for 1% interest without creating a IRS problem if not what is the lowest percent I can charge
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Old 01-31-2013, 07:12 AM
 
Location: East Orlando
26 posts, read 128,236 times
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The IRS doesn't care what rate you charge. You can charge 0% if you want to and you won't even have to report the sale to the IRS at all (they only want you to report your interest income).

The land contract is an agreement between the seller and buyer. As long as both parties agree, you can charge whatever interest or term you want. You could sell a land contract at 0% for 100 years if you wanted to.
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Old 01-31-2013, 10:06 PM
 
8,301 posts, read 11,006,633 times
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Quote:
Originally Posted by jeli2657 View Post
The IRS doesn't care what rate you charge. You can charge 0% if you want to and you won't even have to report the sale to the IRS at all (they only want you to report your interest income).

The land contract is an agreement between the seller and buyer. As long as both parties agree, you can charge whatever interest or term you want. You could sell a land contract at 0% for 100 years if you wanted to.
Are you a tax attorney? Can you back up this claim? If you don't believe that you need to report sales of property to the IRS, I have news for you.

NEXTTIME: For personal or seller-financed loans, the IRS has rules governing what it is expected to be paid as interest. If a person charges too little interest, the Internal Revenue Code has imputed interest rules which basically make the lender liable for taxes at what would be the expected fair market rate. Charge below that rate, and the IRS will tax you as if you received the higher rate. If you give property away for below market value, you may also be subject to gift taxes.

The Internal Revenue Code is very complicated. That's the problem. I was always under the impression that the imputed interest rules applied to all personally-made loans, but upon reading some of the applicable Code recently, it seems that there may be some exceptions as to primary residences or even especially towards farms. I'd need to read the IRS Code more thoroughly--and perhaps even some case law--to have a better understanding of the full situation.

Imputed interest rate tables (or Applicable Federal Rates-AFR) are updated monthy and they can be found at
www.irs.gov/app/picklist/list/federalRates.html

A simpler version can be found at http://evans-legal.com/dan/afr.html

You can also do an online search for more information about imputed interest rules, but there is a lot of misinformation online, just as there is on this forum. From what I've read from the above linked charts, its seems that an interest rate of 2.6% would put you in the clear on a long-term loan. Still, there may be exceptions which exempt sales of primary residences from IRS oversight. Of course, this is not legal advice. If I can dig up more definitive information, I'll try to contact you (NEXTTIME) privately.
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Old 02-01-2013, 06:30 AM
 
Location: East Orlando
26 posts, read 128,236 times
Reputation: 16
I made the assumption that the seller was selling his principal residence. I should have stated that. If you live in your home for at least two years as your principal residence prior to selling it, you do not have to report its sale (and the title agency will not report its sale when you close - they have a document that you will sign attesting that you have lived in the home as your primary residence for at least two years). None of my advise applies to investors. I am not familiar with the investor market.
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