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What would be the pros and cons of either of these for a seller? I'd prefer a lease to own but we have a buyer who wants to do an installment sale (our agent is currently trying to find out why). We've had our home on the market over 6 months and are no longer living in the house- we've rented an apt in a new town. We are fine with continuing to rent for 2 years while the installment sale goes on. But will we be subject to capital gains taxes after 2 years? If we sold it outright now we wouldn't b/c its still technically our primary residence. Also, we still have a mortgage on the house. So if they stopped paying we'd need to foreclose on them to avoid losing the house to our bank. Anyone know the costs of foreclosing on someone?
Most lenders will not allow you to carry a mortgage. I would get approval from your lender before entering into a contract. Most mortgages have due on sale clauses.
Now having said that, the market is tough, so a lender might be totally fine with you carrying the note.
Unless the rules have changed, a homeowner has to have used the home as a primary residence for two out of the 5 years prior to the sale of the home in order to not pay capital gains, but check with your CPA on that one. Rules change.
States handle land sales/installment sales differently. Here the deed is held in escrow and not recorded at the county which makes foreclosure significantly easier.
In a typical installment sale (or a lease to own, for that matter), title does not pass to the buyer until the payments have been made. So you wouldn't be foreclosing on the buyer if they failed to make the agreed-on rent or installment payments, you would be looking to evict them from the property so that you could either occupy it yourself or rent it out. Either agreement will usually trigger your mortgage's due on sale clause, because in either case you have a duty to transfer the title if the buyer performs the agreed-on conditions. Whether your lender would care at this point is another matter.
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