HELP! Land Contract Terms

[Hannah Williams]

Someone is interested in one of my properties that is listed for sale, but they want to do a land contract. I've never done a land contract before. I have some questions about them:

1) What are the typical terms of the contract in Detroit, MI? How much is the down payment and how much per month (as a percentage, in general)?

2) Who obtains insurance on the property, me or the tenant?

3) Are there any legalities I should be concerned about that I might not be aware of when doing a land contract? 

Any help would be so appreciated!

Thank you!

[Parker Ihrie]

@Hannah Williams, I am an attorney so I have to say that whatever I say is not legal advice and you are not my client.  

1. The terms are broadly negotiable. You can treat it as a conventional loan with 20% down or you can ask for a larger sum such as 50%. Interest on land contracts is generally much higher than with conventional/FHA financing. Payments are negotiable, too. You could ask for a down payment with the remaining balance paid in equal monthly installments over a term of years. On the other hand, you could ask for no down payment, payments of X for one year and then a balloon payment for the remaining balance at the end of year X. I am not recommending either - just illustrating.

2.  Generally, purchaser obtains insurance.  You can request to be named an additional insured.

3.  Yes, there are.  You should consult an attorney when entering into a land contract.  I wouldn't simply rely on the title company's form because they do not represent your interest.