land contract

[teacher]

Has anyone here ever bought land using a "land contract" or know anyone who did? What are the benefits, downfalls, things to be careful of, etc? I've heard they can be tricky.

I'm thinking about approaching a landowner about a section of his ground and wondering if he'd do a land contract to save us both some dollars. I've got a real close relationship with him, no brokeback mt. stuff or anything,

but think he might be interested. Thanks in advance for the help.

 

[Critter]

I've never had a contract to purchase land soley, but I did however have to create a purchase contract when we bought our house from an independent seller. Not really the same thing, but there might be a few similiarities. All I can say is make sure you both get an attorney involved with the process so that everything is fair and legal. Make sure you hire someone who knows what they're doing, not just the tax guy from up-town.

 

[blake]

Are you talking about a Contract for Deed?

 

[teacher]

I've never heard of it called a "contract for a deed", but I could be wrong. I don't know much yet but I'm learning.

I googled a little to find out more. There's nothing like firsthand experience though. This is probably more or less a pipe dream though. I'm still trying to wear the spousal unit down to see the benefits of the investment. It's funny that she thinks most of the benefit will be mine!

 

[dbltree]

[ QUOTE ]
Has anyone here ever bought land using a "land contract" or know anyone who did? What are the benefits, downfalls, things to be careful of, etc? I've heard they can be tricky.

I'm thinking about approaching a landowner about a section of his ground and wondering if he'd do a land contract to save us both some dollars. I've got a real close relationship with him, no brokeback mt. stuff or anything,

but think he might be interested. Thanks in advance for the help.

[/ QUOTE ]
They have pros and cons like anything. You may be able to negotiate a lower interest rate and a smaller down payment. Most sellers are likely to be older and will want a ballon contract, perhaps 3-7 years (based on 15-30 years) at which time you take out a conventional loan and pay off the land contract. The catch is that interest rates could be much higher in 5 years? Often you are better off to consider refinancing your home, a second mortgage or just borrow at the best rates around. Expect a 20-25% down requirement from a bank while the owner may accept a lower dn pmt. The pro for the seller is lower capitol gains tax then if they took the entire payment at once.
No need for land contracts to be "tricky" just make sure there is no penalty for paying it off before the time frame the contract is for.
The way things are going...if you have any inclination of buying land...DON'T WAIT! You have nothing to lose by making an offer...5-10 years from now you may be a very happy land owner!

 

[blake]

Try this:

Land Contract

 

[baggin_bucks]

The ground I'm buying right now is on a land contract. I bought it from a family friend and he paid for his lawyer to draw it up I took it to my lawyer and we looked it over together he said everything was good so I signed it. It is alot easier than going through a bank I thought.

 

[Iowa1]

I sold land with a home in Iowa on a contract for deed. The people who bught it had a iffy credit rating but were willing to go with a lot higher interest rate than I could get on my money anywhere else. In two years they were late on their monthly payments 23 times out of 24. Still their credit rating was better after two years and they financed through a bank at a lower interest rate and paid me off.

If you can get a decent fixed rate through a bank you are probably better off. However, there are times when a contract for deed is better. One thing to watch out for has already been mentioned. If there is a balloon payment, which a lot of people want, you may have to refinance at a higher interest rate, and the balloon payment could possibly come at a very bad time for you.