Buying a home that's under land contract for what's owed on it

[Jeremy Hoover]

A friend had entered into a land contract to purchase a home in Michigan he was previously renting for $60,000, on which he's been paying for about 4 years. He currently owes $26,000, but is now entering into an agreement to purchase a different home via land contract. He was originally planning to walk away from his original land contract, but reached out to me to see if I'd like to buy it.

He is agreeing to sell it to me for $31,000 which is $5,000 more than he owes. What would be the best method to complete this sale as he still owes the $26,000 on the contract? 

I'm an agent and wouldn't recommend many people to purchase this way, but I fully trust he will sign the deed over, however, I understand there is significant risk involved just giving him a cashiers check for $26,000. I obviously still intend on getting everything tightened up in a contract, but I'm just struggling to decide how to write it up as it wouldn't be a standard purchase agreement. 

He needs the $26k to fulfill the land contract, the $5k would be what he would make after paying off the contract. How could I write this up so I can front him the $26k to fulfill the land contract and the $5k remainder when I purchase it.

Side note, he entered this land contract with his landlord after previously renting the home for a year. He is unsure if a title company was used and if there was a search or policy. He only recalls that they went to a notary when he signed the contract. The top of the contract does have a statement signed by the Treasurer's Office similar to warranty deeds I've seen certifying they have examined all records and there are no liens, titles held by the state or other individuals, and that the taxes have been paid for the previous 5 years. 

If title insurance wasn't used at the beginning of the process of entering into the land contract, can it be requested before closing? I wouldn't want to front him $26k to buy a possibly encumbered property.

Look forward to the responses, thanks!

[Steve Smithy]

You need to talk to a lawyer.  They can investigate and sell you title insurance, which you will need.  They can act as the intermediary for the sale and hold the money, that way if there is a problem and you can't purchase it then your buddy won't get the money.  For the $1000 or whatever it will be well worth it!

I forgot to add, do NOT buy it if you can't get title insurance!