Can you sell on contract when you buy on contract?

Question

Here is what I have

Im buying 22 acres on contract subject to a  sucessful subdividing I will give them a down payment and then buy on contract with a ballon due in 3 years.  Im all most all the way throguh the process and should be finished mid june. I had planned on putting in the roads as money and time allows over the next year and as soon as I sell on I would put in the well(yes this would be done before I actualy closed )  My best figures are this will cost me in improvments some where abouts 65k but I can spread it out over time or use the funds from the first lot sale to cover this.

Now on a different pice of commercial property that I own I have plans to be building two large buildings that are comprised of 3 units each, (40 by 60 units 3 per building)  and on a nother commercial property I have plans to put up another smaller building. (3 30 by 24 units)  Any ways long story  short the builder that Id like to use for my buildings wants one of my 5 acre lots that im creating.  He is willing to trade me my 3 buildings shells in exchange for one of the lots Im creating.  This is great as he will build them over the next 3 years and I all ready have tenants lined up for the first large building.  Now I all ready have the go ahead from the bank to build the first building it would run about 120k now here in lies my issue, each shell has a value of the large ones 80k each and the small one 35k but the large shells will take an additional 60k each to concrete and finish out, ie electrical and plumbing and the small shell will require 30k.

Any ways back to my question Since we are trading 3 buildings built over the next 3 years for my lot I would have to then pay off the guy im buying the land on contract from and I will be taking a note on the land that I traded to the builder for the value of the un built buildings which means Ill need a lot larger loan, I think ill get it but I want a back up.  OR could I do this since Im buying the land on contract and i could hold the actualy final platting could I sell based only off the new legals, ie with out a pin, the lot the builder wants on contract to the builder with the deal being that he gets the lot free and clear once  all my buildings are built, which would be the same time I file the final platt this would allow me time to get my buildings rented which in turn will pay for the driveways and wells on the land.

I guess after writing all of this to try and give you background here is my actual questions

Can I sell some one a property on contract  that Im buying on contract?

Can I sell part of a property based on an un filed final platt and the new legals from that platt on contract while Im buying the entir property on contract?

Keith Barton · Answer

There may be more to it than has been mentioned so far.

For example, to be a little more specific about the legal description.... Each state has laws controlling how real estate can be sold and how real estate can be transferred to a new owner (2 different things.) The requirements to transfer will definitely have something to say about the legal description. Not sure, but assuming the requirements to sell will also have something to say about the legal description.

ALSO:
What exactly do you mean by buying on contract? When is the seller transferring the deed out of his name and into your name? One comment you made could be interpreted to mean you are purchasing with a land contract. If that is the case, there are usually very specific legal requirements about that whole process, which means you would have to consult someone who can advise you about that in your state.

In General:
If you acquire any kind of ownership interest in property, you have something tangible of value. How much is tangible, and what the value are will depend on too many things to list. If you have something tangible of value, it can be transferred to someone else for value (as long as nothing has restricted your right to transfer the property.) However, the actual value of a less than fee simple absolute interest in real estate doesn't often amount to much. In addition, if anyone in the deal is relying on a bank, the bank can squash the whole thing simply by saying they require a security interest defined as X, Y, & Z: if that exact type of security interest cannot be transferred to the bank, the money doesn't get loaned. Banks are not creative when it comes to security interest. They usually want to see a fee simple absolute interest in real estate for money to be loaned.

Bill Gulley · Answer

I (we) don't mind walking through this deal, I just get the feeling there are many other issues dangling out there. Everything begins with your purchase contract, what kind of contract you are doing and how it allows for any release, assumptions, wrapping the underlying financing, subordination issues, types of interests conveyed, future construction financing and title requirements...etc.

Usually, to sub-divide or to do a minor subdivision the powers to be will require you to be the owner of the property and control to pass title, so this is another issue you need to address in the underlying contract. I assume this is a rural property with limited zonning issues and code requirements, those to need to be addressed.

If you have full control of the issue now.....fire at will! Good luck

Ryan Scritchlow · Answer

yes I realize that about the legals,

Good idea on the partial release and i did plan on talking to my seller about all of this I really dont think they will have a problem with that.  Thanks for the advice and sorry for the rambling Ive been working on this for a couple of weeks now and I have tons going on in my head trying to make sure i get all of the details covered

Bill Gulley · Answer

You need to regroup. To sell you must have a valid legal description of the parcel to be sold, otherwise you are attempting to sell a non estistant parcel.

In your purchase contract you need a partial release amount for any parcel that may be legally described in the future on a square footage basis. Such release could be assigned or wrapped to a new contract if it is properly drawn (terms of your purchase contract).

If you have not disclosed this plan to your seller, you might have a real mess.

Contracts can generally be assignable unless they state otherwise, but such assignment may hinge on your performance as well.

Good luck!