Components to Successfully Selling on Land Contract

You are probably starting to hear the buzz of selling properties on land contract as they have become en vogue again with the mortgage meltdown and the banking freeze out. With all the freelance aspects of putting together a land contract sale here are a few pointers to remember to successfully sell to completion.

#1. Require a healthy down payment. Offering homeownership for $1000.00 down does not create a vested interest in the property on the buyers behalf. Ask for no less than 10% down, and obviously more whenever possible. You want both parties to have a financial interest in the property.

#2. Know your states laws for selling on land contract. Depending on the state, there are restrictions to interest rates, terms you can and cannot write in a contract. For example, in the state of Michigan the max interest rate you can charge on a land contract is 11%. I can't tell you how many times out of state note brokers send me notes to review in Michigan that exceed that number. Those are bad notes. You want to write a good note

#3. Avoid gimmicks. Don't try to charge crazy closing costs and all kinds of fees and hidden charges. Properly disclose everything. Develop a simple word document to accompany the land contract and highlight ALL the components of the contract and both you and the purchaser sign off on each component.

#4. Make it a fair deal for both sides. After you sell the property on contract, you have three options. A. Hold onto the note for the life of it. B. Sell the note at a discount to another investor and C. your purchaser will cash you out with a mortgage. No matter the option, you want to make sure you write a note that can accomplish any of the three.

Selling properties on land contract can be a great additional avenue of revenue for your business, but you have to do it right. We all have a responsibility as investors!