If you have found yourself in a position in which you are struggling to get approved for a mortgage at a fair interest rate, it might be wise to consider the option to buy a land contract instead. This is a purchase of real estate in which the seller finances the buyer; it offers advantages to both parties, especially in an economic climate in which home sellers cannot get a fair price by selling traditionally. If you are about to look for a land contract to purchase, there are certain steps you must follow to ensure success.
Step 1: Find a Home
Before you can buy a land contract, you must first find a piece of real estate that is owned by a party who is willing to consider creative financing. A good place to start is with property that is for sale “by owner.” You can contact these sellers directly and offer alternative financing options.
Step 2: Make an offer
If you find a seller who is willing and able to finance your purchase personally, you must make an offer to buy a land contract. This must be an offer at or near what he is seeking for the house. He is not likely to consider a price that is substantially lower than what he is seeking, especially if he will be financing the deal himself.
Step 3: Consult a real estate lawyer to draw up an agreement
You should definitely find a lawyer who understands not only real estate law, but also land contract deals. He or she will put together a contract that helps ensure that your rights are protected and that the terms of the agreement are carefully spelled out. You do not want to buy a land contract without the aid of a legal representative. This is a very important step, given that there are very few regulations restricting the terms of a land contract.
Step 4: Present your agreement to the seller
Once your agreement is drawn up by legal counsel, present it to the potential seller. He will have it reviewed by his own legal counsel, and will likely return it to you with questions, concerns, and additions. If both of you approach this as a means to an equitable contract between the two of you, you will come to a successful agreement to buy a land contract between the two of you. If you sense that the situation is becoming adversary, it might be wise to move on to another deal. Remember that a land contract will connect the two of you for the full length of the contract.
Step 5: Close the deal
Once you have come to an agreement and the two of you have signed the agreement to buy a land contract, you, the buyer, will make your agreed upon payments on a timely basis until the loan is paid off. During that time, you will hold an equitable title, showing that you have a financial interest in the property; once the contract is paid in full, the deed will be signed over to you.