Land Contract

[RTC]

Has anyone here had an experience with either buying or selling property on a "Land Contract"? If so, would you care to share your experience or your opinion of it?

Thanks
RTC

[Valley Station]

RTC,

For some pretty good info. on Land Contracts.
Go to: Google.com , Type : Land Contracts in Kentucky , click on: search.[:)]

[RTC]

I have already discussed it with my attorney and CPA and also did some reading on it myself. I was just curious of anyone's actual experience with this matter. There are a lot of pros and cons for both the buyer and seller but also some glitches. I will also check out Google and see if there is anything there that I haven't seen yet. Thanks for the info Valley.

[Valley Station]

Also, make sure the person selling the property has deed to property.
A few years back, a 75-year old man, had a piece of property surveyed and subdivided into tracts. He sold the tracts, by Land Contracts.
People paid on "their" property for 5 or 6 years, when the old man died.
It was found out that the property was owned by a woman from out of state and the old man was managing the property.
<u>He didn't own the property and had ripped them off.</u>[B)][:(!]

[joekat46]

Don't buy even an acre without an attorney and fresh survey.

[ksp965]

Land Contracts are a better deal for the buyer than for the seller. As in any contract, it needs to be thorough. As a buyer you need a title search and I recommend a survey. I advise my seller clients not to do land contracts. Several have come back to tell me that they wished they had listened to my advice.

[RTC]

Actually I am selling a piece of commercial property. The thing that makes me interested in this deal is the lessening of the tax liability, the biggest downfall I see, should the buyer default, it would be tied up in the courts for a couple of years awaiting a judges decision and then a master comissioners sale that in turn would cause me to have to buy the property back, just like a bank would have to do.

I have done all the leg work that I was advised to do, credit checks, etc. I have calculated all the numbers and it seems like it is a good deal for both parties with the exception of a few details, thats why I thought I would get opinions from other people.

ksp956..what are the reasons for advising your clients not to do a contract? Have the ones that wished they had not gone with the contract had their buyers default on them?

joecat..i totally agree about the attorney, for buying or selling.

[RTC]

Valley....too bad that ole dude took those peoples money, but thats why you really need a good attorney to make sure all the t's are crossed and i's dotted. Actually I think that the deed has to be held in escrowe, so that the deed holder, in this case me, can't do anything with it such as borrow money against it. Then at the end of the contract term and all the money has been paid, then the deed would be transferred to the buyer.

[ksp965]

RTC, you and the other commenters have identified many of the problems. Most deal with default, some with obtaining the buyers' deed after final payment. To protect a buyer, recordation of your contract in the local county court clerk's office is constructive notice to potential lenders or buyers. By all means obtain the service of an attorney who regularly practices real estate law. Just because you have a law license doesn't mean you are proficient in all areas of law. Property law can be tricky.

[RTC]

Thanks folks for the input.

[Valley Station]

RTC ,
The "language and terms" in the land contract, is whatever the seller and buyer agrees to. Be careful on what you sign.[B)]
Around here,it's common for "land companies" to sell by Land Contracts with clause if you default on payment schedule, you default and lose your down payment( 10-20%).They seem to prefer, young, high risk types. They seem to sell some properties , once a year.[}:)][V]

[RTC]

Yes Valley, you have to be careful who you deal with and especially not buying something you can't afford. I had never considered a "land contract" until this guy confronted me with the idea. My first impression was not a chance. Then I decided to do play with the numbers and it turns out that it is a great deal for both of us unless something happens and the guy defaults. Thats when the problems start. The worst case senerio as I understand it is, I might possibly have to pay the back any equity that has been built up plus some court costs to get the contract terminated. I think the key is, if the guy defaults within a couple of years, it shouldn't be a big deal. On the other hand if it is in the 7 or 8 year mark, thats when he may want to go to court and try to recoop some of his loss. This guy has been in business for about 5 years now, which is a good sign. He needs to expand his business and at the present is in a month by month rent deal and he wants something more permanent. I have no use for this property anymore. It has served it's purpose for me for the last 20 some years. It has also been sitting empty for the last 2 years due to the fact that it is a rather pricey piece of real estate and hard to find buyers or tennants for the large building. Anyway, I am still in the "considering" mode and I haven't made any decisions yet. Thanks again for the input.

[grouseguy]

RTC,

I'm a commercial lender and have one suggestion to help out your situation. I'm going to assume that the reason that the buyer has suggested a land contract is because he doesn't have sufficient equity in the property (down payment) for a bank to consider the deal, since you have checked out his credit and business. If that's correct, maybe you should consider putting in a 3-5 year balloon, whereby the buyer would be required to refinance the land contract through his bank after he has built up the necessary equity in the property through his monthly payments, appreciation and/or improvements to the property. If you need any assistance on the calculations, etc., just email me the particulars of the tranasction and I can provide and amortization schedule and balloon amount.

Good Luck!





"It's time for the commissioners to value their relationship with the sportsmen, more than their relationship with the governor." Address of outgoing President, Rolly Beers, to the LKS convention, June 14, 2003

[RTC]

Grouseguy..thanks for the offer, but with the on-line banking calculators the numbers are rather easy for people like me to use and understand.

Your absolutely right about the "small down payment". He can only afford about a 3% down pmt. I have checked this guy's credit references and also some character references. He is just a young, hard working guy that is trying to better himself. He runs a business with his brother and mother. Apparently they had a rough time growing up as kids and just want a chance. I remember when I bought my first business...I was 24, no money, just a desire to work and have something. I went to the local bank and talked to the President (who is now my next door neighbor) about a loan. His remark..."I know your family and this town needs this business"...he loaned me the money. I am thankful for what this man did for me. He not only helped me, but he was also concerned for the community as well. Not somthing you hear a lot about nowadays. Since then I have sold the business to a larger company and the building is empty and I have started a new business in another town and no longer have any need for this property.

The only problem I have with the balloon payment is that it will not be in my favor due to the tax burden, which is one of the big selling points for me even considering this deal and it really wouldn't help him any due to the fact that the interest rate is much cheaper than the bank, but more than I can get on a CD. Not that I mind paying taxes, I just don't want to pay anymore than I have too.

Once again..thanks for the offer