Owner Finance Vs. Land contracts

[Terry Royce]

I am familiar w/ owner financing, but I recently ran into a seller who didn't want to do owner financing but instead wants to do a land contract.

Can someone with more experience in this explain the difference and the pros and cons?

Thanks

[Jon Holdman]

What you're describing, LeJon, is a wrap mortgage. A land Ccontract (aka contract for deed) is a bit different. With a seller carried note, whether there is an existing mortgage (making the new note a wrap) or the seller owns the house free and clear, the buyer gets a deed. With a land contract, that's not the case.

With a land contract, the buyer gets a contract from the seller stating conditions that must be fufilled for the buyer to get the deed. The seller retains the deed. The buyer makes payments on the contract. Once the contract is fufilled, the seller hands over the deed. Pretty much the say you buy a car where the lender holds the title until the loan is paid off. You have possession of the car, but not the title.

In terms of the amount of control retained by the seller, the choices are:

Most control with seller, least control for buyer:
1) Lease/option (aka rent to own, lease/purchase)
2) land contract
3) wrap
4) seller financing of a free and clear house
Least control for seller, most control for buyer.

The first three choices, assuming there's an existing loan in place, most likely all violate the due on sale clause.