One more Advantage of a Land Contract

Written by;

Nicholas D. Perrino
Attorney at Law
Prodigy Title Agency

A Seller was thinking about entering into a Land Contract, but they were afraid they would have to do a Foreclosure Action if the Buyer defaulted on the payments. This scared him into wanting a lease instead.
 
I explained that a Land Contract can be like a Lease which allows an eviction or it can be like a sale and a loan, requiring a foreclose.

Whether the owner can evict or foreclose depends on either 1.) how long the buyer has been making payments or 2.) how much money the buyer has put down up to that date.

The rule is 5 years or 20%. Once a Buyer has made payments for 5 years or has paid 20% of the purchase price, then owner becomes a Lender. Until then, the owner is a Landlord.



Therefore, before the buyer has paid for five years, and before he has paid in at least 20% of the price, the owner can EVICT him if he breaches the contract.



After the buyer has paid for five years or more, OR has paid at least 20% of the price, the owner must file a FORECLOSURE ACTION upon a buyer default.



Land Contracts can have benefits over leases, so don't let the prospect of a foreclosure be the decision-maker.