Everybody seems to have a different idea about how to buy or sell a home and how to generate wealth with real estate. Indeed, there are many “get rich quick” angles, programs that teach buyers to find stupid sellers who will sell for no money down at low, low prices and sellers to find stupid buyers who will pay too much for real estate. While these get-rich-programs may work some of the time, they also waste a lot of time and energy, promise much and deliver little.

Takes home buying for example, what do most people do? They contact a real estate company, get hooked up with a commission-driven real estate agent, and pay too much for property. The they find themselves hooked up with wealthy mortgage lending organizations staffed with attorneys who are ready to pounce on them and foreclose if they are late making payments on there fancy “interest only loan” or “negative amortization loan” or some other fancy loan program. The creative lenders (often in cahoots with agents) qualify an otherwise unqualified borrower to buy the property they really couldn’t afford to begin with. The real estate agent gets the commission, the mortgage lenders get the fees and commission and the buyer gets the over-sized house and the monthly payment, (that would be the principal, interests, taxes AND insurance payment). There is a better way…

It’s called a land contract and you don’t need a real estate agent or wealthy mortgage lender with a staff of attorneys waiting to gobble you up either.

I believe that buying a property under a land contract is one of the smartest things a person can do for the following reasons:

1. When you buy property directly from a seller under a land contract, you and the seller are on a more level playing field economically—many sellers are not “rich” and don’t have a staff of blood sucking attorneys working for them. For this reason, they are less inclined to pounce on you to foreclose on a property.
2. Sellers who are selling under a land contract are usually motivated sellers and can be flexible on selling price, down payment requirements and interest rates on the land contract. Everything is negotiable, a seller may accept a lower selling price if you give them a higher interest rate on the contract. Or, they may take payments on the down payment. They may take a balloon cash-out in 5 or ten years, etc. The point is there are a lot more negotiable elements when dealing with a seller on a land contract.
3. If you have an economic situation arise (loss of job, lay off, etc) a seller is much less inclined to foreclose on you. This is especially true if you have a good track record with them, and they will often work with you to get through the tough times, especially if you get along well.
4. If a land contract is structured correctly, it is just as legal as an outright purchase and you have most (if not all the rights) of home ownership.
5. You eliminate real estate commissions and mortgage application fees.

The most important consideration you need to focus on in a land contract deal is two things:

1. Have an attorney specialized in real estate transactions write, read, negotiate and/or approve of your land contract before you sign on the dotted line and…
2. Make sure you have a “right to sell” clause in the land contract that allows you to sell the home on the market (with or without a real estate agent). As long as the original seller under the land contract is cashed out when you sell the home (they will be because they hold the title) there shouldn’t be any problems.

Like I say, everybody has an angle… this one is called common sense.

Copyright © 2006 James W. Hart, IV All Rights Reserved