Considerations for Selling a House on a Land Contract

By Mabel Ekperen

A land agreement also referred to as an agreement for a deed, is an agreement in which you fund the purchaser’s buy rather than relying on a third-party lender. Such that until the buyer pays the last installment, you retain legal title to the property. These types of contracts could be beneficial or disadvantageous for sellers.

Sourcing for Credit

The client does not need to obtain financing to conduct business with you because you are funding the acquisition yourself. This helps you to draw purchasers who would not otherwise be able to afford your home. Engaging with a buyer who has a low credit history or none, on the other hand, is more likely to result in a purchaser default.

Flexible Terms of Payment

Because there is no third party involved in the deal, you have a lot of leeways when bargaining with the buyer. You might not require a deposit from a buyer who has limited capital backing, for example. Therefore, you can ask for a larger purchase price or a huge origination fee as the last installment.

Duration

Third-party lenders request a lot of paperwork, and their engagement in a property purchase typically causes friction. A land contract can substantially speed up the process of closing a real estate deal if you are in a hurry.

Payment Default

If a buyer fails to pay, the seller is required by state law to pursue charges. In some states, for example, the seller must choose between forfeiture and foreclosure, then go on to alert the buyer, and initiate a state court complaint.

The seller maintains all monthly repayments and reclaims ownership of the property under forfeiture, while the purchaser owes nothing. The buyer is viewed as the “equitable” owner of the property during the foreclosure process, which means that his prior payments under the mortgage are not considered.

The court rules that the asset be auctioned and that the earnings be used to pay the seller the full sum owing under the agreement, whereas, any excess earnings go to the buyer, who is responsible to the seller for any shortfall.

The SAFE Act

Before finalizing a land agreement, you may be required to obtain a home mortgage originator license if you are selling real estate that isn’t your primary residence.

The Federal Secure and Fair Enforcement Mortgage Licensing Act, often known as the SAFE Act, mandates that real estate mortgage loan originators submit to an FBI background check, complete a 20-hour education program, take a test, and be listed in a national database.

However, there are exclusions to the SAFE licensing criteria, such as when selling your own house, a commercial facility, or to a close relative.