Land Contracts Are Back

As Sellers continue to struggle to sell their homes, some are willing to accept a Land Contact. The Sellers that typically fit this situation are older people who have paid off their mortgage. Thus they can sell on land contract with only $10,000 to $20,000 down and hold the 'mortgage' themselves. In today's investment environment, these Sellers are likely to get a better return on their money than in any other investment vehicle, so if the buyers have some cash to make the risk worthwhile, it can be a good deal.

For the buyers it means no bank fees to originate a loan, but typically they do pay an interest rate from 1/2 point to 2 points higher than they might receive with a conventional mortgage. It also can be a very quick process to put a land contract into place.

Why would a buyer want one?? Typically the buyer looking for land contract terms on a home purchase is someone who has a bad credit situation, perhaps from divorce or bankruptcy, and cannot get a mortgage from a conventional lender at this time. Yet, the buyer has a good job, cash in the bank, and could be ready to obtain a conventional mortgage in a few years. That is the perfect land contract applicant, and the land contract usually is written with a term of 3-5 years, but on a 30 year amortization so one has 'normal' payments, and the buyer has to get a mortgage at the end of the 3-5 year period as the loan comes due then as a balloon payment.

Any questions? If so, please do call me at 800-923-3245. Barbara