Trying to understand Land Contracts

[Jeremiah Dunakin]

Hello all. Currently I have one sfh. It is a traditional mortgage. I am trying to understand land contracts and how they work. I have a few questions on the process.

1. How do the terms work? Is it for 30 years?

2. Is there intrest in the payment?

3. Who holds the title. 
4. are realtors involved, and closing cost.

5. What are advantages/ disadvantages for both seller and buyer

[Jay Hinrichs]

Quote from @Account Closed:

Quote from @Jeremiah Dunakin:

Hello all. Currently I have one sfh. It is a traditional mortgage. I am trying to understand land contracts and how they work. I have a few questions on the process.

1. How do the terms work? Is it for 30 years?

2. Is there intrest in the payment?

3. Who holds the title. 
4. are realtors involved, and closing cost.

5. What are advantages/ disadvantages for both seller and buyer

A Land Contract can be for the length of time the buyer and seller agree to. 30 years is fine. Usually the seller wants interest, usually the buyer doesn't want interest, it's negotiable.

The title is held in escrow until the debt is paid off. If the buyer stops making payments, the seller can foreclose. Advantages for the seller are that they may be able to sell a property not fit for the MLS and they don't have to fix up the property to MLS standards, they save the realtors fee of 5% or 6%, it's a more flexible sale, they get monthly payments they can use for income. There are more advantages.

The advantages for the buyer include that usually it's a lot easier to qualify for that kind of financing than bank financing, they may not have to have a down payment, they can tie up a property they otherwise couldn't. There are more advantages as well.

Disadvantages to the seller include that they do not get cashed out. They become a lender with all of the inherent risks. If they don't set it up correctly, they could lose a lot of anticipated income and have to foreclose.

Disadvantages to the buyer include, if it isn't set up correctly and the seller dies, ownership may be in question with a long painful lawsuit.

Mike I have not seen a title company "hold title" Since my Dad used to put hundreds of lots into a holding agreement with Fidelity title back in the 60s.. are you sure on that one ?  of course every state is different and every title company different..  In all the land contracts I have taken back it is more than you can count on 2 hands.. title remains with ME. And there is an abbreviated foreclosure process ( Oregon its called a Strict foreclosure ) but it is a process.. And again it will be state specific.

Risk to the buyer is the seller gets a judgement against themselves and buggers the title. For those reasons I would never buy on a land contract only sell. I want a title to pass and a deed of trust or mortgage to the seller.

Terms as noted are whatever buyer and seller agree to.. either way if the seller takes no interest on the deal they will have imputed interest and if they check with a CPA that will kill the deal right then. plan on paying interest.

I could be wrong on all of this but I am pretty sure this is how it works in the states I have carried contract for deeds  CA OR WA.