Land contract potential issue

[Caleb Zuniga]

I've heard some chatter (here on BP and other places) about potential issues with land contracts and how they've been ruled as circumventing foreclosure. Can anyone cite and references for this?

[Bill Walston]

@Caleb Zuniga It's not that a land contract or a CFD has been "ruled as circumventing foreclosures."

I think you may be referring to a post by my esteemed colleague @Bill Gulley, where he said, in relevant part, "[t]here have been some recent issues with contract for deeds, they have a pre arranged quit claim deed to be used in the event of default and have been determined as circumventing state foreclosure laws."

He is spot on. SOME CFDs required that a quit claim deed from the buyer back to the seller be held in escrow. In the event the buyer did not make timely payments, stopped paying, or otherwise breached the contract a clause was triggered that released the quit claim deed to the seller, thus returning the property without the need of foreclosure. This DEFINITELY circumvents the foreclosure process in all states.

So, whether the CFD attempts to circumvent foreclosure would depend on how it is written. Just another reason to have your documents prepared (or reviewed) by a competent real estate attorney and not just downloaded from the 'net, but I digress.