Land Contract A Good/Bad Idea? (insurance, agreements, attorney, renter) - Real Estate -Brokers, appraisals, development, lease, investing, relocation, apartments, houses, condos, values, mortgages, loans... - City-Data Forum

topsekret · 08-03-2007, 08:55 AM

I have my house for sale. My realtor showed it to a man last week, a friend of hers. She called and asked me if I would be willing to do a Land Contract with this man. He is in the process of getting a divorce, owned a business with his wife and they are filing bankrupcy on the business along with the divorce. He has a good job. Is interested in doing a Land Contract for two or three years until he has his credit back in order. Can't put down a down payment, but is willing to pay the realtor and closing costs. She says I can charge him whatever interest I want. For me, red flags are waving. She said he is very responsible and would never ask this if it was someone she thought wouldn't pay. I replied that I'm not that interested if he cannot come up with a down payment since I hold ALL the risk. I did offer a rent to own option where his payments would go towards my loan principle. I haven't gotten a response yet. I am desperate to sell this house by the end of August. I have had people looking but no offers, it's getting down to the end. I'm not sure what to do with this man. Desperate to get rid of the house, but don't want to regret a decision. Can anyone offer me some advise?

cynmkolohe · 08-03-2007, 12:47 PM

Where I live, the Big Island of Hawaii, contracts like you are describing are done quite often. Agreements of sale, PMMs...But generally there is a significant downpayment.

Your option proposal sounds like the best first choice--wait until you hear his response and if that doesn't work, be sure to review the details very carefully with a real estate attorney who has experience with these transactions. You are wise for heeding the red flags. These situations can be costly to resolve if they go wrong.

topsekret · 08-03-2007, 01:36 PM

I just spoke with my realtor. She told me that foreclosing on a Land Contract is just as fast and as easy as it is to get a renter out. But, with the Land Contract I will get the taxes and insurance paid for by him. If I rent I still pay them. She said I can charge any interest rate I want to and suggested 7.5%. That's what I will be paying on my new home. Wouldn't I want to charge him more? Especially with no down payment.

cynmkolohe · 08-03-2007, 02:23 PM

Generally speaking, the terms do include a higher interest rate than the going rate. We often see 8-10%--but keep in mind that most, though not all, of the situations we deal with are for vacant land. If you decide to proceed with this, I still think you need to discuss it with an attorney to get the facts about the process of dealing with a foreclosure--ask for a consultation with someone who has actually gone through it before. (And you can cover taxes, etc. by asking for a higher rent.)

topsekret · 08-06-2007, 10:59 AM

I have asked two people that have done this. One say's Land Contracts are just fine, and didn't see a problem with my situation. The other one said not to do it. I spoke to my realtor and told her that he has to make me an offer before I decide. In the mean time, I have put an ad in the paper for rent/sale, I live by a very active military base, so I shouldn't have a hard time renting to someone in a better situation. Thanks for you advice!!!!!!!!

topsekret · 08-09-2007, 01:13 PM

Update today, this guy hasn't even filed BK with the courts yet! So then he can sign the land contract and file on me! By the way MY realtor is this guys girlfriend!!! HMMMMMM no wonder she is pushing this! who exactly is she working for me or for him???? Oh, brother. I told her to forget it, I want no part of it.