Conveyancing

A real estate land contract is an agreement between the buyer and seller. It is related to the purchase of property in which some payment is deferred. A land contract is very similar to acquiring a mortgage loan for the purchase. Real estate land contracts are known by different names in different countries. "Contract for Deed" and "Installment Contract" are two common names for a land contract. In a real estate land contract, the seller is called the vendor and the buyer is called vendee.

For the land contract, the purchase price can be paid in installments over the duration of the contract. After the completion of payments, the seller has to transfer the valid legal title through a deed. During the installment period, the purchaser is entitled to ownership and even handed title to the property. The seller keeps the legal title and is liable to pay for any outstanding loan or mortgage. Purchasing real estate through a land contract can also be done by paying cash or by borrowing money from a lender.

The advantages of real estate land agreements for the purchaser/vendee are mentioned below:

* If you are having trouble arranging a loan for your purchase, land contracts can be a good option for you. The contract effectively functions similar to leasing with the option to buy at the end of the agreed period or during the contract period. The payments made during the course of the contract are considered equity in the purchase.

* The conventional closing costs are reduced in the land contract.

* Because banks are not involved in land contracts, the need for purchasing title

* When you purchase real estate through a land contract, then you won't be required to bear loan points costs that you would otherwise if you had secured finance through a bank.

Disadvantages: If the seller does not file or record the papers due to a provision in the seller's loan agreement requiring the borrower to retain possession of the property, this can create problems if the lender becomes aware of the situation. If a forced sale results you may be required to come up with settlement or risk any financial trouble that can ensue.

The advantages of land contracts for the seller/vendor are as follows.

* With land contracts, a vendor can make extra money by taking the purchase amount along with any interest on the principal balance.

* The vendor maintains the ownership rights, when the real estate is sold through a land contract.

* If you have an underlying mortgage loan, then selling real estate is a time honored way of earning profits in the residential real estate industry.

A land contract can work well for both the buyer and the seller providing proceedings are conducted the correct way. If you are privy to this form of contract, it is important to get the advice of a suitably qualified real estate lawyer to ensure everything is above board.

Contact Us | Privacy Policy |