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I had a recent phone call from a potential client who had entered into a Land Contract several months ago. A Land Contract is essentially a sale whereby the seller (known as the “Vendor”) agrees to sell the property and also act as the bank. The buyer (known as the “Purchaser”) agrees to remit installment payments to the Vendor with the understanding that if the payments go into default the Vendor’s options include foreclosing on the property much the same as a bank would do. Additionally, the Purchaser is usually not given a full thirty years to payoff the Land Contract, as is customary with most bank-issued mortgages. Instead, the Purchaser must typically acquire third party financing (i.e., a regular bank loan) anywhere from three to ten years after the Land Contract, and use it to pay off the principal balance due to the Vendor.
The problem facing my caller was that he had paid all of the customary seller’s closing expenses, aggregating to several thousand dollars and after only a few months into the contract, the buyer began making excuses about not being able to make the payments. Upon closer questioning, it turned out that neither the seller nor the buyer had been represented in the transaction; they pulled the forms off of the internet and essentially had a do-it-yourself closing. Because the seller was essentially honest, the buyer obtained clear tit …Read more
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