SELLING ON CONTRACT WITH A BANK LOAN STILL ATTACHED

[Travis Elliott]

Is it possible for me to purchase a house and turn around and sell it on a contract? Couldnt I set up an escrow for the new purchaser to pay into?

Thanks

Travis

[Jon Holdman]

I assume by contract you mean you're selling with a land contract. Doing that WILL trigger to DOS. No question. A land trust can help hide the ownership, which might (or might not) make it harder for the bank to figure out it sold.

I too suspect that as long as rates are low, and you buy the property with an investor loan, it won't be called. If banks clear their backlogs of foreclosures and rates jump up, that situation might change.

What you're doing is really a glorified rental. Don't assume you'll be getting the payment month after month. Be prepared to make the payments or fix something big if you don't get paid by your buyer or if they can't afford to fix something major.

I don't think a NNN lease would hold up in court for a SFR residential rental. A storefront in a strip center or a office, yes. But a residential lease with a person or family? Don't think so. There's a whole body of law around residential leases, and you lease terms can't override that. But I don't think that applies if this is being sold on a land contract.

Really, you need to find a good real estate lawyer in your area how knows both the applicable laws and also knows how things get handled in your area. You're putting yourself in a risky situation by financing the property then selling with a land contract. You've violated the DOS, yet promised to deliver the property when the land contract is completed. If the bank does decide to call the loan (foreclose), you'll have a hard time fulfilling your end of the bargain unless you can quickly come up with the cash to pay off your lender. Not that I think that risk is particularly high, but you should certainly be aware of what could happen.