Land Contract Offer

**KarenR** · 04-19-2009, 04:43 PM

Our home has been on the market for 2 years. Our realtor has often suggested we open ourselves up to the possibility of land contract. As much as I don't want to do that..really just want to be "over" this..we are considering the option now that he has someone who is definitely interested.

My question is that in doing my "homework" via the internet, I stumbled across some verbage relating to land contracts and the fact that the mortgage company may have a clause in our note stating we cannot do that. Sure enough, when reading over my mortgage documents, there is a paragraph regarding that particular issue....I think.

Is entering into a land contract/lease agreement considered a "beneficial interest in the property which includes an installment sales contract or escrow agreement"?? (words taken from the mortgage note)

Thanks..we'd appreciate any and all feedback. Should mention the house is located in Ohio if that makes any difference.

**Malok** · 04-19-2009, 07:17 PM

Thats going to require a legal opinion. You need to ask your real estate agent for guidance (a quick call and/or fax to one of the active real estate attorneys in town should provide you an answer).

**Greg** · 04-20-2009, 05:33 AM

With a land contract you are actually selling your property. Your mortgage most likely has a "due on sale" clause in it somewhere which requires you to pay off the loan balance when you sell the property.

While it is not likely your bank will find out you have sold the property, if they do, they can call your mortgage balance due. In the current economy, banks are reluctant to call any of these notes due for this or any other reason. However, this does not mean they won't call it due at some point in the future when they are back on their feet and arrogant again.

If your agent has not warned you about this then this is not the agent to help you with something like this.

**happyworker** · 04-26-2009, 04:04 AM

What's the likely the lender would find out, and what's the likely hood, in this turmoil, they will call the loan due. Long as the mortgage is getting paid you should be fine. Seek the advise of an attorney that is competent in land trust.

Happyworker

**Greg** · 04-26-2009, 05:07 AM

Originally Posted by happyworker

What's the likely the lender would find out, and what's the likely hood, in this turmoil, they will call the loan due. Long as the mortgage is getting paid you should be fine. Seek the advise of an attorney that is competent in land trust.

Happyworker

If the deal was not permanent you would have a point. But this turmoil won't be around 5 years from now and the land contract will. Times and bank attitudes change.

**REITrainingWhse** · 04-26-2009, 06:06 AM

What I suggest is talk with an attorney on this one... As it has been noted a land contract is where you actually SELL the house to buyer, where you don't own the house anymore. Then you need to FORECLOSE on them, if they default in their payments... YUCK!!!

If you give them a LEASE-OPTION, they are renters, with the OPTION to buy. You still own the property, until they excerise their option, where you get cashed out, and if they default on their lease, YOU EVICT! Much less complicated and expensive. That is what I do... lease-options!

As far as your lender excuting the DUE ON SALE clause, though I can not make the blanket statement that they will not do this, I have taken over countless numbers of mortgages, and never once had one called, not eve threatened to be called... The banks are interested in one thing, CASH!!! As long as they are getting it, they have the "Don't Ask, Don't Tell" policy. But once the money stops, well then they are concerned, but in that case, they ae going to do the same thing as if the house wasn't sold... FORECLOSE.

So, I would look into the lease-option route for you, and make the lease and option for no more than a year... You can ALWAYS renew! (In WI, if the lease is longer than 1 year, most of the rights are removed from the landlord and put in favor of the tenant... We are a tenant friendly state [unfortunately.])

Hope that helps!

Michael.