Common Differences Between Land Contracts & Purchase Lease

Description

Land Contract

Purchase-Lease

Deposit

Usually 10-20% of price- Minimum
Usually less than 3% of sales price

Taxes

Paid by Buyer-Common

Paid by owner

Price

Fixed price agreed to

Fixed price set – Must Appraise or negotiate price

Term

Normally 3-5 years minimum – up to 20 years

Normally 1-3 years

Title

Buyer given Equitable Title Normally recorded with state

Owner holds Title – no change

Payment

Based on interest rate& taxes

80-100% of Square Feet- Common

Interest

Max 11% – Normal 7-8% – Common

None

Balloon

Balance owed after payment, taxes and interest

Mortgage based on appraisal at end of contract term

Rebate

None

25% of 1st year’s lease pay’s -Common

Credit

Must have ability to pay off balloon- Good Job, Inheritance, etc… Large down payment will offset low credit score

Normally above 500/550 credit score Must have a good job

Existing Mortgage

Mortgage contract must allow! Due on sale clause prevents this

No transfer until closing, mortgage companies allow leasing

Recorded in County

Yes

No

Default-Buyer

Loses all deposits / Payments

Loses all deposits & rebate, can be evicted

Default-Seller

Usually no mortgage

Can request proof of payments if large mortgage

Common means it is seen often, but not always!
Above differences are from my experience and certainly not the same for all Land Contract sales.

Larry Williams
248-917-2323
www.LarryWilliamsHomes.com