Risks of selling your home on a land contract and other real estate questions answered | Vitality: Active Seniors
Q: We are in the process of buying a used house. The last time my wife and I bought a home 32 years ago, we received a copy of a mortgage lender survey. Now we are told that they are no longer doing surveys. Is that correct?
ON: Yes that’s right. Mortgage lenders stopped asking for mortgage surveys many years ago. It’s very rare to see one at a closing today. As a buyer, you have the option of requesting a survey at your own expense or having a title policy issued with no standard exceptions, which is also carried out at your own expense.
Q: We have a small house that we use as a cottage in the north and are thinking of selling it. We mentioned it to a neighbor and they said one of their friends’ children would buy it if we sold it to them under a real estate contract. What do you think of the sale of a land contract?
ON: Every now and then this question is asked and I will say the same thing that I always say. I think it’s a terrible idea unless your property is undesirable to most buyers or has negative issues that wouldn’t make it mortgeable. There are so many drawbacks to a real estate contract for a seller. Previously, I contacted an attorney I know and respect (contact me if you want his name and number) to get his contributions on real estate contracts and here is what he had to say:
“I would never recommend that a customer take on the role of a bank by entering into a real estate contract. If the prospective home buyer is deemed too risky for the bank, it should be considered too risky for you too. This was a priority mortgage fraud area where a buyer came by and bought real estate with part funded through a bank (first lien) and the balance from a real estate contract (second lien) with the senior. You would then default on the second and the land contract holder would often not know how to pursue his remedial action and would get stuck. When you conclude a real estate contract, you as the owner give up your right of ownership of the property and can only regain it after a delay and an often lengthy legal process. Worse, if a senior is dependent on contract income and the contract defaults, the party on the other side of the real estate contract again doesn’t have an outstanding payment history. then the income they relied on is gone, defeating the purpose of agreeing to the land contract in the first place. In short, seniors often look at land contracts because they like the idea that the property is generating income, but when they default they have no income and have to sue to get property back. “
As a broker, another concern I have for a seller is what if the buyer damages or strips off the property? (Removes kitchen cabinets, faucets, air conditioning, etc.) It happens! Now you will have to spend between $ 10,000 and $ 50,000 or more to get your property back in order or suffer a very large loss on sale in the same condition. If the buyer has adequate credit, he should be able to take out a mortgage. You don’t have to take that huge risk.
Market update: The January housing market update for Macomb County and Oakland Counties looks like this. Macomb County prices rose more than 18% during the month and Oakland County rose nearly 12%. Residential real estate / condominiums in the market portfolio declined again. Macomb County’s market inventory decreased nearly 57% and Oakland County’s market inventory decreased nearly 50%. The average market days in Macomb County were 30 days and the average market days in Oakland County was 36 days. Macomb County closed sales increased nearly 7% and Oakland County closed sales increased more than 6%. (All comparisons are month-to-month, year-to-year.)
Steve Meyers is a Real Estate Agent at RE / MAX Metropolitan in Shelby Twp. and is a member of the RE / MAX Hall of Fame. Contact him with questions at 586-997-5480 or [email protected] You can also visit his website: AnswersToRealEstateQuestions.com.