[darstar]

Lending banks, brokers, do not recognize equity in land contracts. You can not "sell" intrest or equity in the property. You can not borrow against land contract property. In fact there have been scams involving these properties. Government backed property loans often require ownership of property for a specified amount of time when there was a land contract purchase agreement. As to being able to transfer contracts on properties the laws vary depending on States.

[Jswee]

Originally Posted by darstar

Lending banks, brokers, do not recognize equity in land contracts. You can not "sell" intrest or equity in the property. You can not borrow against land contract property. In fact there have been scams involving these properties. Government backed property loans often require ownership of property for a specified amount of time when there was a land contract purchase agreement. As to being able to transfer contracts on properties the laws vary depending on States.

The real property interest or right that a land contract buyer (vendee) acquires when they enter into a land contract is known as equitable title. It's a recordable property interest that is separate from the legal title that is retained by the seller (vendor). The property right of equitable title can most certainly be sold, transferred or assigned to another party for compensation in Michigan, unless there is a specific prohibition included in the wording of the land contract. For tax purposes, the state of Michigan considers the acquisition of equitable title to be a transfer of property ownership, specific to the date the land contract is signed, not when the land contract is paid off and the legal title is transferred.

[jackmichigan]

^^^^
This is correct.

Some of the earlier information in this old thread is simply wrong. In Michigan, a Land Contract purchaser is considered to be the owner of the property. A "transfer" is deemed to have occurred and the purchaser can claim a Principal Residence Exemption if the property is the purchaser's principal residence (even though the Deed is not received until the contract is paid off).

darstar is correct, however, in noting that Land Contracts can be risky--both to buyers and sellers. Sellers are exposed to particular risks if the purchaser fails to pay property taxes...or if they fail to maintain property insurance and the place burns down. Purchasers could trash the place and default on the Land Contract, leaving the Seller with an asset which is greatly diminished in value.

Likewise, there are risks to Purchasers--particularly if the Seller is unscrupulous. Underlying mortgages which aren't paid pose some of the most significant risks.

Still, Land Contracts can be an effective way of providing Seller-financing as long as appropriate precautions are made. And, yes, an interest in a Land Contract property can be sold--as long as the contract doesn't prohibit assignment of the Land Contract to another party. I have bought and sold several properties on Land Contract and I have even assigned (sold) my interest in a Land Contract. Sometimes it's a lot better than dealing with a bank.

[mostie]

Originally Posted by darstar

This story is a good example of the fact , that you own nothing with a land contract , until , its paid off. Quite different than a mortgage.

I would think that the only way a person would ever own a home outright, would be if they paid cash. Otherwise, the bank that holds the mortgage owns the house until it is paid. But then again...we never really "own" it, because we pay taxes on it for the remainder of the time that we live there, sooooo.....

[darstar]

Originally Posted by jackmichigan

^^^^
This is correct.

Some of the earlier information in this old thread is simply wrong. In Michigan, a Land Contract purchaser is considered to be the owner of the property. A "transfer" is deemed to have occurred and the purchaser can claim a Principal Residence Exemption if the property is the purchaser's principal residence (even though the Deed is not received until the contract is paid off).

darstar is correct, however, in noting that Land Contracts can be risky--both to buyers and sellers. Sellers are exposed to particular risks if the purchaser fails to pay property taxes...or if they fail to maintain property insurance and the place burns down. Purchasers could trash the place and default on the Land Contract, leaving the Seller with an asset which is greatly diminished in value.

Likewise, there are risks to Purchasers--particularly if the Seller is unscrupulous. Underlying mortgages which aren't paid pose some of the most significant risks.

Still, Land Contracts can be an effective way of providing Seller-financing as long as appropriate precautions are made. And, yes, an interest in a Land Contract property can be sold--as long as the contract doesn't prohibit assignment of the Land Contract to another party. I have bought and sold several properties on Land Contract and I have even assigned (sold) my interest in a Land Contract. Sometimes it's a lot better than dealing with a bank.

In Michigan there are many LLCs ( thousands) that trade properties all the time. Washington State also allow this kinda land transfer. ( no banks involved). I know, I went thru this mess last year. The title surch was extensive with all the LLCs trading amoung themselves. All it takes is a simple corp. resolutation.I took two lawyers, several thousands and 6 months to settle my land contract and turn it into a morgage . I had built a 400,000 house on this property with the land contract , not knowing for sure just who owned the land. Glad that's over !

[jackmichigan]

Originally Posted by mostie

I would think that the only way a person would ever own a home outright, would be if they paid cash. Otherwise, the bank that holds the mortgage owns the house until it is paid. But then again...we never really "own" it, because we pay taxes on it for the remainder of the time that we live there, sooooo.....

With a mortgage, you own the property but have the responsibility of paying back the loan. It's still your property. Same with a Land Contract. You own the property but have the responsibility of paying off the contract. When you own the property free and clear, property taxes are simply one of the continued responsibilities that go with ownership.

To take the philosophical angle to the extreme, however, perhaps we should think that we never truly "own" property since we're all going to die. The land will live on, but we need to be good stewards of property while it's under our care.

[jackmichigan]

Originally Posted by darstar

In Michigan there are many LLCs ( thousands) that trade properties all the time. Washington State also allow this kinda land transfer. ( no banks involved). I know, I went thru this mess last year. The title surch was extensive with all the LLCs trading amoung themselves. All it takes is a simple corp. resolutation.I took two lawyers, several thousands and 6 months to settle my land contract and turn it into a morgage . I had built a 400,000 house on this property with the land contract , not knowing for sure just who owned the land. Glad that's over !

Your story highlights the need for people to do their due diligence before they buy. As you've found out, it's very aggravating and expensive to correct problems after-the-fact.

It's highly recommended that purchasers get appropriate legal advice--and a title insurance policy--before they buy.

[gerrybender]

Ok i have a home i bought and paid cash for in 2009. I am wanting to sell on land contract with 7000.00 down, the buyers want me to go thru with all the title work again and the cost is 1500.00 and takes about two or four weeks. 'they want to move in now why would i as the owner with the deed and title insurance have to pay any of this. I feel i dont need it but they do can you help me.

[gerrybender]

is this where i could get some feedback on land contracts

[jackmichigan]

Originally Posted by gerrybender

is this where i could get some feedback on land contracts

This thread is over 4 years old. You should post your question by starting a new thread.