When To Use Land Contracts To Make The Deal Safer And More Profitable – Real Estate Investing

When To Use Land Contracts To Make The Deal Safer And More Profitable – Real Estate Investing

Joe: The third one is a land contract or a
contract for deed, depending on which state you’re in. A land contract is simply an agreement
to buy a property at a particular price with a particular interest rate with a particular
payment plan over a particular period of years. It’s very much the same way that you buy a
car — when you buy a car, you go out and get a loan from a standard lender, they take
the title to the car, they hold onto that title and they have an agreement with you
to make payments to them to pay off the loan, and as soon as you pay off the loan then they
transfer that title to you and then you have that car free and clear. It’s the same with
the land contract. The seller, the person who’s selling it to you, keeps the deed in
their name, but they have another agreement with you, which is recordable — you can take
it down to the county recorder and record it — saying that you’re going to buy it over
a certain period of time for a certain price and if you fulfill the terms of the agreement,
then they’re going to deed you that property after its done. So that’s another way to buy
a property. Joe: They can have underlying mortgages on
it. You never want to buy one that has mortgages on it that are more than the land contract.
And with all land contracts, it should be standard that they can never finance it above
what is still owed or remaining on the land contract, so that you remain safe as the buyer
in that transaction. Joe: So when you start getting to this, this
is the middle of the transaction, and now it becomes almost as safe for the sellers
as it is for the buyer. If you default on this deal, if you’re the seller of the transaction,
you sold it on a land contract and that buyer recorded that land contract at the county
recorder, then you’re going to have to go through a judicial foreclosure to get that
property back. It’s not a problem and in a lot of places it’s easier than going through
a foreclosure on a mortgage, so it still makes sense for the seller.
Joe: But, if you’re the seller in the transaction, what you want to do is try not to have that
land contract recorded, because a lot of times where we’ve had people who defaulted on land
contracts that we’ve sold to them, it’s been easy to agree with them, tear up the land
contract and say, ‘That’s enough. We’re going to put somebody else in that property. We’re
going to sell it to somebody else. We’re going to put a tenant in there. We’re going to sell
it on a lease option; we’re going to sell it outright,’ or whatever it is we choose
to do, and we can get that property back without going through a foreclosure process, and usually
that buyer will allow us to do that without any argument. But if they record it, then
you have to get it off the title, so it becomes more complex. So, if you’re buying the property
on land contract, make sure that land contract is recorded. If you’re selling on a land contract,
try not to have that land contract recorded. Joe: What we try to do is keep control over
that land contract and put it in our files so that nobody takes it down to the recorder
and records it. If the buyer really wants it recorded, then we can talk about it and
we can do that if they really need that to be done.
Joe: So, we’ve got subject-to, we’ve got multi-mortgage, we’ve got land contract — those are the top
three if you’re buying a property in the hierarchy of zero down structures. And they give you
control of that property in relation to where they are at in the hierarchy; the higher they
are in the hierarchy, the more control the seller has in the transaction.


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    SliP _


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    Shlisa Shell

    The owner of my rental house offered me a land contract a couple days ago and I told her it sounds good but give me a month or two to think about it, educate myself and talk to family first. Your video is the first I have viewed.I found it helpful and I think you.

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    what if you have a land contract deal goin and the seller passes/becomes ill. who do you pay? is the deal still good?

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    Richard Grissom

    When buying on a Land Contract and the property has a underlying mortgage, who pays the insurance and if so how is the insurance structured?

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