The foreclosure process is extensive and costly. Avoiding foreclosure as a real estate investor would certainly be an advantage. Instead of using a normal Agreement of Sale for property, an investor can turn towards a Land Sales Contract which does not require the foreclosure process upon default from the borrower.
A Land Sales Contract (also known as “Contract for Deed” or “Land Installment Contract”) is a form of seller financing in which actual possession of the property stays with the seller until the borrower fulfills the contract by paying off the principal and interest. After the terms of the contract are met, title of the property transfers to the borrower. If the borrower defaults on a Land Sales Contract, the foreclosure process is not triggered. Instead, the seller simply executes an eviction in Landlord Tenant Court. The eviction process is much simpler and much less costly than a foreclosure.
Why would a buyer agree to a Land Sales Contract and give up the rights under foreclosure? The simple answer is that a buyer wouldn’t unless he or she did not have a choice. However, there are many times where a prospective buyer cannot get approved for the financing required for a mortgage even though they are financially sound. This can happen due to past credit troubles, divorce, and other instances. These buyers can be saved by seller financing through a Land Sales Contract. A seller can simply request more down, or a higher rate of interest. Either way, both the seller and the buyer win. The seller avoids foreclosure and the buyer can purchase a property without going through the conventional mortgage system.
For specifics and further implications on Land Sales Contracts and whether it is right for you, please call us here at Bergmann & Good.
Bergmann Law LLC 