There may also be other benefits of using a land contract. When a third-party lender, for example. B a financial institution, grants a loan, this third party has its own interests to protect itself from the other two parties concerned, the seller and the buyer. Determining the correct title and value of the property to be used as collateral is important for the lender. Therefore, the lender typically requires a title service, including title search and title insurance by an independent title company, termite valuation and inspection of the property to ensure it has sufficient value, land measurement to ensure there is no assault, and the use of lawyers to ensure that financial statements are properly executed. These requirements for third-party lenders contribute to the closing costs required by the lender from the seller and/or buyer. If the seller is also the lender, these fees are usually not required of the seller and can lead to cost savings and fewer complications. It may also be the seller`s position that, if the buyer needs one of these services, he can bear the costs and make arrangements himself. In the case of real estate that is only relatively undeveloped land and where the seller is willing to finance, the price of the vacant land can be so low that traditional closing costs cannot be profitable and can be a barrier to a quick and simple sale.
Simple financing and a simple sales transaction can be a good selling point for a seller to offer to a buyer. A land contract – often described by other terminologies mentioned below – is a contract between the buyer and seller of real estate, in which the seller makes financing available to the buyer upon purchase and the buyer pays the resulting loan in instalments. Under a land contract, the seller retains legal ownership of the property, while allowing the buyer to take possession of it for most purposes other than legitimate ownership. The sale price is usually paid in periodic instalments, often with a balloon payment at the end, in order to reduce the duration of payments compared to the fully amortized loan (i.e. a loan without a final balloon payment). If the full purchase price, including any interest, is paid, the seller is obliged to transfer (to the buyer) ownership of the property. A first count from buyer to seller is usually also necessary. Since land contracts can easily be written or amended by any seller or buyer; There are a large number of repayment plans that can be encountered. Only interest, negative depreciation, short balloons, extremely long amortizations, to name a few.
It is not uncommon for land contracts not to be registered. For several reasons, the buyer or seller may decide that the contract should not be entered in the register of documents. This does not invalidate the contract, but increases the exposure to adverse effects. Some states, such as Minnesota, award contracts without an acceleration clause, which allow the seller, in the event of a delay, either to terminate the contract, to compensate for a major deficiency, such as in the case of a devaluation, or to continue for 18 months or more, while the buyer, if not a company, retains its rights to the property while recovery attempts are made. Until that date, the buyer will often qualify for bankruptcy, which, in the absence of this acceleration clause, will effectively make the contract an option to be tempered if the buyer has no other mortgage assets.. . .