All Forum Posts by: Michael Redden

My home state made it difficult to get a mobile home dealer's license and pretty much made one required for most transactions with mobile homes.

That's why I haven't done it.  

I have serious reservations about whether actions like that are constitutional vis a vis the contracts clause.

But yeah, you gotta sue the government AFTER you are harmed by it.  "Harmed" in this context can be a little fluid.  Seek out local counsel if you want to take up that fight.  The government does what it wants until the judiciary slaps their hands usually. (and sometimes it still does it.)

Either call a real estate attorney to get a standard form that they use or you can google around for your bar association's forms.  Often the bar association will put out a very generic stock form that is fill in the blank.  Many times these mirror the ones used by the realtors.

As for marketing, the MLS is what that is for. There are often specialized brokers who work just with FSBO. They'll let you put it on the MLS and sell it yourself for a smaller fee than a realtor commission. I may be a bit biased here, but if you run into troubles marketing the property then I'd suggest that your reconsider selling without an agent.

I've sold properties both ways.  Anytime that I've had trouble marketing a property, a realtor's services were more than worth the commission.

@John D.

I'm only licensed in Minnesota. This is not legal advice and is only my opinion.

You have two different concerns here. First, is an indemnity clause.  This doesn't really shift any liability. It just creates an ability to make the other person pay for your damages.  The efficacy of this clause at its core is limited to their ability to pay.  That normally comes down to insurance coverage limits.  This is what we buy insurance for.  You can make them indemnify you.  But, if the company doesn't have the money or files bankruptcy (depending on the type of lawsuit) you would still be out of luck.

The other kind of clause is one where you can't be held responsible.  This is called an exculpatory clause.  The extent to which these can be used are different from state to state.  This is one of those clauses where it says something like "Owner shall not be liable for any action of tenant whether it stems from negligence, gross negligence, or any intentional act."

States vary on what you can get away with here, but so long as you don't excuse yourself from intentional acts or gross negligence then in most states its ok.

Whether or not you can get someone to sign a contract with these clauses in it is another story.

Also, this won't prevent you from being sued. The owning entity, the property manager, and the contractor will likely be sued if something goes horribly wrong.  The plaintiff's attorney will want to involve all three of your insurance companies because it is more likely to get a settlement or a larger settlement that way.  It is rare for tort damages (as opposed to contract claims) to go to court unless it truly was a catastrophic loss or the insurance company decides to not cover the loss.  So be prepared for that.  A good contract clause is great. It will do you good if you can get the others to sign it.

But often the real meat comes from having the right insurance too.

@Samuel Choi

Sam,

As folks have explained this is essentially borrowing the cash value and paying it back with interest.  It was a way to turn taking cash out from a policy into a loan rather than a surrender/partial surrender.  Since surrender and partial surrenders had tax consequences and could affect the life of the policy.

With that in mind, there are two huge things to know about this technique.  Firstly, since you are putting your money in the policy first, you will not only lose money to fees and premium taxes, but you can also quickly torpedo this strategy if it isn't done correctly.  A previous poster mentioned IRC section 7702.  It not only talks about the minimum actuarial growth, but it was a part of a larger tax code change in the 1980s called TAMRA.

Essentially, people were using life insurance products as investments rather than to insure a risk.  So this section put limits on this behavior.  There is a limit to how much you can fund a life insurance policy at any given time and keep the tax benefits.  If you put in more than this, the contract becomes a "Modified Endowment Contract."  Once a life insurance policy achieves MEC status, then even loans are taxable.

Further, if you don't keep the policy healthy and it lapses with a loan pending then the loan becomes a surrender/disbursement and there could be taxes due at that time. This is a very powerful strategy, but you'll want a good tax advisor and good life insurance producer who understands these complexities to help you out.

@Peter Walther     This might be a fear for some, but it shouldn't be in Wisconsin. So long as the Land Contract is recorded, even a mortgage has been found to be junior to it. See: Fair Finance Corporation v. Roomates, LTD, et al., 2015AP728 (March 17, 2016).

There have been instances where a mortgage or other lien was allowed to attach to the Vendor's interest to allow the creditor to simply garnish the Land Contract payments.  That is also very common for the holders of any note or mortgage.  Far more common for private mortgages such as this, but something to also keep in mind if you invest in mortgages and promissory notes.

There are always outlier fact patterns, but a judgment creditor is not going to be able to jump priority like that in most cases and states.

Contracts for Deed and Land Contracts generally are most favorable to the seller in most states.  Wisconsin's laws are much more balanced though.

But with these protections in mind, it might be preferable to use them in Wisconsin.  It could certainly lead to more deals if you only have to meet the Seller's personal standards rather than mortgage underwriting standards.  There are cons just like there are pros to this approach.  They are very common in Minnesota and Wisconsin.  They also do get recorded in the land title records.

While the Seller might want to just use the bar's form or a form that they find on the internet, you might benefit from having an attorney look at it.  Additionally, if you get some tweaks to the form that you really like, it will be one that you can use for more than one transaction.  This kind of financing could even become kind of like a niche for you.

Meredith:

I'm only licensed to practice law in your state of Minnesota, so keep that piece in mind.  However, you are correct that the Land Contract is Wisconsin's version of the Contract for Deed.  Wisconsin law actually is a lot nicer to the vendee than Minnesota.  In Minnesota, there isn't even a redemption period when you default on a Contract for Deed.

In Wisconsin, each of the remedies upon default actually give that to you.  The owner is indeed likely doing this for the tax benefits.  If you have more specific questions, I'll do my best to give you advice with my licensing in mind.  I normally don't answer too specifically on these things, but I am licensed in your state of residence.

Another pro/con to think about is that CoD's and Land Contracts are not often reported to the credit bureaus.  This can have an affect on your credit score.  While late payments won't affect you, neither will paying the loan on time or in accordance with the terms.  Additionally, an enforcement action in Wisconsin will be in court.

This is another difference for Wisconsin as opposed to Minnesota.  Most CoD defaults in Minnesota do not involve court actions.  So, a lawsuit to remove you from the title in Wisconsin could look like a foreclosure on your credit report where in Minnesota this is often not the case.  CoDs can be a better deal in Minnesota depending on circumstances rather than traditional financing.

Keep all of this in mind.  Choosing when to refinance out of this Land Contract can provide you a lot of flexibility however.  You'll also always know your creditor.  Many mortgages are packaged and sold off to investors.  The Land Contract likely won't be sold.  A good relationship with this creditor can provide a lot of flexibility if something goes wrong.

-Additionally, this is my opinion and not formally legal advice. I don't know all the facts from just what you posted.-