What Does It Mean To Buy A House On Contract?
If you’ve been dreaming of buying a home but have not been able to obtain a conventional mortgage, you may want to take a look at using a more creative method of financing. You may be able to buy a house on contract, also known as a land contract. A land contract could turn out to be the right option for you.
What is a Land Contract?
A land contract, also known as a contract for deed, is basically a plan where the seller keeps the title in his name and s/he acts as the lender rather than a lending institute. Like with a bank loan, the buyer makes a down payment, lives in the home and makes regular payments to the seller until the home is paid for in full, whether with the buyer’s own money or the buyer eventually obtains a mortgage from a traditional lender. The buyer then receives title to the home.
Although laws regarding land contract sales vary from state, to state, there should be a written contract with the specifics of the agreement spelled out. The contract should cover things like who is responsible for repairs, who pays the taxes and insurance, the interest rate, the payment amount and other pertinent details.
Pitfalls to Be Aware of When Buying with a Land Contract
Fortunately, most sellers are honest people and will live up to the terms of their agreement. Unfortunately, there a few sellers who will try to take advantage of someone buying with a land contract.
One concern is that the seller will use the property to secure a home equity loan or other type of financing. If, for some reason, the seller then defaults on that loan, both parties could lose the home.
Or, if the seller already has financing on the home, it is assumed that the buyer’s payments would be used to make the mortgage payments, pay the taxes and other necessary expenses. If the seller fails to meet those obligations, what happens to the buyer?
It is strongly advised that anyone who is looking to buy a house on contract have an attorney or other person familiar with real estate law in your area look over the contract before you sign it. It should also be notarized and recorded.
This is not to say that no one should buy with a land contract. On the contrary, purchasing a home on contract can work nicely for both buyers and sellers. It is only wise, however to make sure everyone’s rights are respected and no one is taking too large a risk.
If you are looking for Eden Prairie homes for sale on contract, search for homes online or in newspapers, or contact a local Eden Prairie real estate agent for any possible tips on finding sellers willing to consider creative financing, which might include the chance to buy a house on contract . In today’s market, more sellers are willing to think about this option. It could turn out to be the perfect way to buy the home of your dreams.