Land Contract with Family

[Bryan Wilson]

Hello everyone, 

Curious your thoughts on a contract to purchase land with family.  I have a plot of land in an ideal location of Palmer Lake, Colorado right on the lake.  The property could sell for approximately $120k and is only going up in value.  My grandma has offered it to me at $90k.

My question revolves around a fair seller financing deal for the both of us.  She is 85 and would have no problem entering into a long term contract, but the rest of the family might have issues.  

I was hoping to offer a 15 year fixed contract @ 3% to match up with IRS requirements.  

My other option I considered was 30 year amortized, 10 Year Balloon payment due same interest rate.  

Any ideas that are better? As far as the above options it will depend on what the family is willing to accept. I have a primary residence I would sell and receive a decent amount of equity and can construct a new home on the lot. I can use conventional/FHA financing on the construction with one of the lenders I do business with so a large amount of the equity will be retained and would leave me enough to cover the balloon payment in 10 years.

What does everyone else think?  

[Bill S.]

@Bryan Wilson why do a land contract? Do an outright sale with a mortgage note and deed of trust. Have a title company do the closing and get title insurance. Terms would be spelled out and you would own the property outright. The estate would get the note as an asset which would mean someone would inherit it and you would make payments to them. Easy peasy lemon squesy. On a site note the state has a standard form for each the Deed of Trust and the Note. Just fill in the blanks. Have an attorney review if you like. 

The typical use of land contracts is to protect the interest of the seller (make it easy and cheap to regain possession of the property in the event of non-payment) with a less than stellar buyer.