Land Contracts

Land Contract

Using a land contract (or contract for deed or other similar
terms) to buy your home is very similar to getting a mortgage
loan from a lender and using these funds for your purchase. Some
of the terminology is slightly different. The seller is known as
the VENDOR; you, the buyer, are known as the VENDEE. In this
type of transaction, the seller/vendor makes the final decision
about whether or not to make the loan.

Whether you use your own funds and pay cash, or if you borrow
the money from a lender, or if you buy on the installment plan
(land contract sale) directly from the seller - you OWN the
property! You do not receive the deed to your property until you
fullly discharge the land contract, but you do get what is known
as equitable title. This form of ownership
enitles you to all of the rights (like the tax benefits) and
privileges (like paying the property taxes!) that cash buyers
get.

Not having the bank involved in your real estate transaction is
good in an important way. They won't kill your first home deal
just because you don't presently meet their standards for
income and/or amount of down payment available. You may not have
much money saved for a down payment yet, and you are still
earning a relatively small salary - but you KNOW that will
change soon. Just because you are not qualified for a home loan
in the eyes of the bank doesn't mean you shouldn't be a
homeowner. Many sellers will share this point of view.

However, there is an important reason to get a new mortgage
loan from the bank in order to buy your home: they take care of
many important details for you. These matters include ordering
the appraisal, title search, and survey. The bank will set up
property tax and insurance escrow funds, do the document
preparation and recording, and perform the closing itself.

In fact, although I firmly believe you should always retain an
attorney to review all the documents (banks DO make mistakes!!)
you can probably get by without hiring (and paying for) a lawyer
if you buy your home with a financial institution's assistance.
On the other hand, if you do choose to buy your home using a
land contract, retaining a qualified REAL ESTATE lawyer
is imperative!!


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For more information about land contracts, mortgage loans,
working with a real estate agent, and other topics, please visit
the author's website.