|
Post by tea4me on Jun 21, 2011 13:11:09 GMT -5
My friend's house has been on the market for about two months ($169,900). Someone wants to buy it - but they want to buy it on a land contract until their other house sells.
How do you feel about land contracts? No specifics have been reached yet (i.e. - down payment).
|
|
Deleted
Joined: Oct 5, 2024 13:31:18 GMT -5
Posts: 0
|
Post by Deleted on Jun 21, 2011 13:12:53 GMT -5
Can your friend afford that? why not just a contingent sale?
|
|
swamp
Community Leader
THEY’RE EATING THE DOGS!!!!!!!
Joined: Dec 19, 2010 16:03:22 GMT -5
Posts: 45,617
|
Post by swamp on Jun 21, 2011 13:16:15 GMT -5
My friend's house has been on the market for about two months ($169,900). Someone wants to buy it - but they want to buy it on a land contract until their other house sells. How do you feel about land contracts? No specifics have been reached yet (i.e. - down payment). What do I think if land contracts? I think that they are a really bad idea. Why: If the buyer defaults, the seller has to do a foreclosure just like they're the bank, and those are expensive. If the seller gets a judgment against them during the term of the contract, they may not be able to convey clear title. What's wrong with a contingency for the sale of their own home? The house can stay on the market until the contingency is met. Or, the buyer can just suck it up and carry two houses until theirs sells.
|
|
Deleted
Joined: Oct 5, 2024 13:31:18 GMT -5
Posts: 0
|
Post by Deleted on Jun 21, 2011 13:19:26 GMT -5
It's a little odd to use a land contract. Is the buyer proposing to take over the existing loan?
I'm not a big fan of them for residential sales. They are complicated and the risks to both parties are greater than other types of transactions.
I'm inclined to agree with Archie; your friend should either do a contingent offer with a kick out clause (48 or 72 hours) or nicely tell the prospective buyer to come back when they have their house under contract.
|
|
|
Post by tea4me on Jun 21, 2011 13:23:34 GMT -5
I think I will suggest a contingency sale. I never thought of that.
Meanwhile, if someone else comes along and wants to buy it, friend will be able to sell to them? Is that how contingency sales work?
|
|
swamp
Community Leader
THEY’RE EATING THE DOGS!!!!!!!
Joined: Dec 19, 2010 16:03:22 GMT -5
Posts: 45,617
|
Post by swamp on Jun 21, 2011 13:26:10 GMT -5
I think I will suggest a contingency sale. I never thought of that. Meanwhile, if someone else comes along and wants to buy it, friend will be able to sell to them? Is that how contingency sales work? Yes, if that's the way the contingency is written.
|
|
8 Bit WWBG
Administrator
Your Money admin
Joined: Dec 19, 2010 8:57:29 GMT -5
Posts: 9,322
Today's Mood: Mega
|
Post by 8 Bit WWBG on Jun 21, 2011 13:32:27 GMT -5
...:::"Meanwhile, if someone else comes along and wants to buy it, friend will be able to sell to them? Is that how contingency sales work?":::...
In the times I've seen this contingency, the buyer and seller had to agree on how long the contingency was in force, and during that time, the seller could not sell to anyone else.
Of course that is during a buyers market. If you haven't had any offers, then you don't have much room to argue. I remember that during the sellers market, whenever the word "contingency" was used, the seller pretty much said "NEXT".
I suppose a buyer and seller could set whatever terms they want if they agree to it.
|
|
swamp
Community Leader
THEY’RE EATING THE DOGS!!!!!!!
Joined: Dec 19, 2010 16:03:22 GMT -5
Posts: 45,617
|
Post by swamp on Jun 21, 2011 13:33:21 GMT -5
I suppose a buyer and seller could set whatever terms they want if they agree to it. Bingo.
|
|
Deleted
Joined: Oct 5, 2024 13:31:18 GMT -5
Posts: 0
|
Post by Deleted on Jun 21, 2011 13:34:15 GMT -5
"Meanwhile, if someone else comes along and wants to buy it, friend will be able to sell to them? Is that how contingency sales work?" Yes but your friend needs to do some homework. As a practical matter, once a property goes under contract it is effectively taken off the market unless it's a really hot market subject to a lot of back up offers. Your friend's agent needs to research the "to be sold" property. Is it priced right? How long has it been on the market et cetera. There's a real risk if they contract with a buyer who has an over priced property that could take 6 months to 1 year to get sold if your friend needs to move soon. That's why a very nice thanks but no thanks can be the right answer.
|
|
Deleted
Joined: Oct 5, 2024 13:31:18 GMT -5
Posts: 0
|
Post by Deleted on Jun 21, 2011 13:36:03 GMT -5
I suppose a buyer and seller could set whatever terms they want if they agree to it. Bingo. except for illegal acts, correct?
|
|
cronewitch
Junior Associate
I identify as a post-menopausal childless cat lady and I vote.
Joined: Dec 20, 2010 21:44:20 GMT -5
Posts: 5,979
|
Post by cronewitch on Jun 21, 2011 13:36:43 GMT -5
I have used them to buy and sell and my parents have many times. First you must make sure they can afford what they are buying, second you must be ready to deal with them not paying.
I bought my garage on a land contract with the owner carrying the contract. I got the house the day before on a mortgage and had not sold my old house. He put a lien on the old house so he would be paid 10K on closing. I paid it off when I sold the old house and paid enough on the new house to get rid of PMI.
Mom sold her house to her grand daughter and they sold the house before and the summer house on contracts to strangers. So far it has always worked and you can make a decent amount of interest. I sold 5 acres on contract and had bought on contract at 9%.
If I were to be the sellers of the house I would consider it if they had an appraisal of the house for sale and it had clear title. I would put a lien on it filed with the court and charge a ridiculous interest rate like 10% and have a clause in about legal fees and penalties.
|
|
midjd
Administrator
Your Money Admin
Joined: Dec 18, 2010 14:09:23 GMT -5
Posts: 17,720
|
Post by midjd on Jun 21, 2011 13:41:24 GMT -5
I handle foreclosure cases, and land contracts are an utter quagmire. I'd stay away, for the reasons already noted.
|
|
Clever Username
Well-Known Member
Joined: Jan 27, 2011 14:15:59 GMT -5
Posts: 1,313
|
Post by Clever Username on Jun 21, 2011 14:09:00 GMT -5
but they want to buy it on a land contract until their other house sells. To me this is screaming: Someone doesn't think they can afford two homes at once! It sounds costly to disagree. I also don't see any reason a lease with an option to purchase wouldn't work. You're basically swapping eviction court for foreclosure court.
|
|
|
Post by tea4me on Jun 21, 2011 14:38:32 GMT -5
but they want to buy it on a land contract until their other house sells. To me this is screaming: Someone doesn't think they can afford two homes at once! It sounds costly to disagree. I also don't see any reason a lease with an option to purchase wouldn't work. You're basically swapping eviction court for foreclosure court. I would hesitate on the lease with option to purchase because then if a "real" buyer comes along, they would not be able to buy until the lease is up.
|
|
midjd
Administrator
Your Money Admin
Joined: Dec 18, 2010 14:09:23 GMT -5
Posts: 17,720
|
Post by midjd on Jun 21, 2011 14:44:52 GMT -5
Missed the part where it's only been on the market 2 months. This isn't that long - unless it's urgent that your friend sells the house, I'd say wait for a better buyer to come along.
|
|
swamp
Community Leader
THEY’RE EATING THE DOGS!!!!!!!
Joined: Dec 19, 2010 16:03:22 GMT -5
Posts: 45,617
|
Post by swamp on Jun 21, 2011 14:54:49 GMT -5
To me this is screaming: Someone doesn't think they can afford two homes at once! It sounds costly to disagree. I also don't see any reason a lease with an option to purchase wouldn't work. You're basically swapping eviction court for foreclosure court. I would hesitate on the lease with option to purchase because then if a "real" buyer comes along, they would not be able to buy until the lease is up. A land contract is not a lease with an an option to purchase. Two completely different animals.
|
|
constanz22
Senior Member
Joined: Dec 18, 2010 14:32:17 GMT -5
Posts: 4,219
|
Post by constanz22 on Jun 21, 2011 15:32:56 GMT -5
"Meanwhile, if someone else comes along and wants to buy it, friend will be able to sell to them? Is that how contingency sales work?" Yes but your friend needs to do some homework.[glow=red,2,300] As a practical matter, once a property goes under contract it is effectively taken off the market unless it's a really hot market subject to a lot of back up offers.[/glow]Your friend's agent needs to research the "to be sold" property. Is it priced right? How long has it been on the market et cetera. There's a real risk if they contract with a buyer who has an over priced property that could take 6 months to 1 year to get sold if your friend needs to move soon. That's why a very nice thanks but no thanks can be the right answer. They need to look into the laws in their state. This is not true. I know for a fact this isn't the case in NY. If the sale has ANY contingencies, the property continues to be listed, marketed and shown and can be sold to a different buyer at any time up until the contingencies are removed.
|
|
|
Post by tea4me on Jun 21, 2011 15:38:44 GMT -5
I would hesitate on the lease with option to purchase because then if a "real" buyer comes along, they would not be able to buy until the lease is up. A land contract is not a lease with an an option to purchase. Two completely different animals. Yes. I understand that. If a person is leasing with an option to purchase, isn't the lease usually for a set term - i.e. - 6 months or a year? What if someone else wants to buy but the lease is not up for another five months? Wouldn't the potential buyer have to wait for the lease to be up before he could move in? If someone was buying it on land contract, a real buyer would not have the option to purchase. I think friend should just leave it on the market and wait for a real buyer (mortgage or cash). He is not in a hurry to sell it.
|
|
Deleted
Joined: Oct 5, 2024 13:31:18 GMT -5
Posts: 0
|
Post by Deleted on Jun 21, 2011 22:10:16 GMT -5
"They need to look into the laws in their state. This is not true. I know for a fact this isn't the case in NY. If the sale has ANY contingencies, the property continues to be listed, marketed and shown and can be sold to a different buyer at any time up until the contingencies are removed." I think you missed my point. Technically, legally, the property is still on the market and depending on the "kick out" clause another buyer can be shown the property, make an offer, and set the clock ticking to make the original "perform" e.g. remove the contingency. But as a practical matter who is going to do that in a slow market when there are dozens of other properties to look at? Unless it's a screaming deal or very unique an agent will skip that listing and only show properties that are truly "available". It can happen but it's unusual. Back when I sold property in the very early 80s (remember those 17% interest rates?) I had a seller who failed to disclose that she was in foreclosure She was going to lose the house and I brought in a buyer myself from the dozen or so open houses I held (I was trying to help her "save" her house). The seller was convinced that I wasn't representing her properly so we had a kick out clause if a better offer came in. Another agent brought in a higher offer which netted the seller the same ($0) but "looked" better to the neighbors and relieved me of the accusation of the double-ended deal. I was happy to have the other transaction and I turned around and sold a much better and only slightly more expensive house to the couple who made the original offer.
|
|
Clever Username
Well-Known Member
Joined: Jan 27, 2011 14:15:59 GMT -5
Posts: 1,313
|
Post by Clever Username on Jun 22, 2011 13:05:52 GMT -5
A land contract is not a lease with an an option to purchase. Two completely different animals. Yes. I understand that. If a person is leasing with an option to purchase, isn't the lease usually for a set term - i.e. - 6 months or a year? That's the beauty of this plan. You're the one writing the contract!I'd write one with a "fish or cut bait" clause. Technically, I think it's called a right of first refusal. So, Billy Boy moves in, your realtor takes down his sign, but keeps it listed. If you are presented with an offer, the tennant is told "fish or cut bait." He's got the option to make good on his offer.... or walk. But I agree with others listed for 2 months, you don't need to get this creative.
|
|
Clever Username
Well-Known Member
Joined: Jan 27, 2011 14:15:59 GMT -5
Posts: 1,313
|
Post by Clever Username on Jun 22, 2011 13:06:51 GMT -5
A land contract is not a lease with an an option to purchase. Two completely different animals. Yes. I understand that. If a person is leasing with an option to purchase, isn't the lease usually for a set term - i.e. - 6 months or a year? That's the beauty of this plan. You're the one writing the contract!I'd write one with a "fish or cut bait" clause. Technically, I think it's called a right of first refusal. So, Billy Boy moves in, your realtor takes down his sign, but keeps it listed. If you are presented with an offer, the tennant is told "fish or cut bait." He's got the option to make good on his offer.... or walk. But I agree with others listed for 2 months, you don't need to get this creative.
|
|
Deleted
Joined: Oct 5, 2024 13:31:18 GMT -5
Posts: 0
|
Post by Deleted on Jun 22, 2011 13:36:28 GMT -5
"So, Billy Boy moves in, your realtor takes down his sign, but keeps it listed. If you are presented with an offer, the tennant is told "fish or cut bait." He's got the option to make good on his offer.... or walk." So the prospective buyer makes a down payment and makes monthly payments and another buyer can bump him and he loses everything he's put towards the house? Ummm yeah...I see them lining up for that deal
|
|