Purchasing a small mobile home park via. land contract - need some advice

[Tim Braun]

Hello all, hopefully this is the right place for this. I am considering purchasing a small mobile home park (6-11 pads) on a land contract. I'm addressing the site details on a different post, so I was hoping to get some info on land contracts here. I have another post about the park, this is more about the financing side of it.

I asked the buyer if he would consider seller financing, and he said he would be open to a land contract. The purchase would be $55,400, the payments I have proposed to him would be $5k down, $450/mo for the first year, then $700/mo until paid off. I asked about seller financing, he suggested a land contract with some sort of deed transfer at around 50% purchase completion. He made it sound like we wouldn't be an attorney and that we could do it as soon as I was ready. I have to do some work on the property and bring in some homes so I don't want to get $20k-$30k into it and find out that I might be in a pickle and lose it - especially since I'll be adding quite a bit of value to the property. I have talked to a few people about the seller and everyone says he is a good guy, sort of a public figure in the area so I don't have any real character concerns but I'd rather be safe than sorry.

Does anyone see any issues doing something like this? Anything to watch out for? I am working on researching land contracts, I have never done one before.

[Matt Hurley]

I’m not familiar with MHP, but I’m an investor and work in the title industry. Land contracts are different state to state (from what I’ve seen) and you 100% need to go through a title company and use a real estate lawyer. A hand shake agreement with a handwritten contract is super risky and ownership could never properly transfer. Then you’re out years of payments. 

For any land contract deal, I would suggest that the signed deed is held in escrow by a 3rd party (like a lawyer or title company) and released once the terms of the LC are met. If he has a loan on the property, or if you’re allowed to keep taxes in his name (here in MI, we can’t do that. Taxes must transfer), then you should also put your payments into escrow or with a servicing company so there’s no way the owner takes your payments then bails on making his payment obligations. 

Don’t take my word on everything, talk to a real estate specific lawyer. Good luck on the rest of negotiations!