MICHIGAN LAND CONTRACT ATTORNEYS
What are Land Contracts?
A land contract may provide you with more flexibility when working towards the sale of a home. These contracts are between you (the seller) and the buyer of the property. As the seller, you provide the financing for the buyer who agrees to repay the loan in installments based on the amount of the purchase price for the home. Land contracts allow buyers who are not eligible for traditional financing through a bank or mortgage company to still purchase a property.
Our Michigan land contract lawyers at Grewal Law PLLC can handle all aspects of drawing up your land contract, including the recording of all the proper paperwork with Register of Deeds in Ingham County and the surrounding municipalities. Mick Grewal, a licensed real estate broker, can help with the development of your land contract.
How Do Land Contracts Work in Michigan?
Once a buyer agrees to accept a land contract for a piece of property, the exact terms of the agreement will need to be drawn up. The terms of the contract will include having a deed drawn up. The type of deed typically written is a warranty deed. The deed will outline the passage of the property from the seller to the buyer after the last payment is made satisfying the full purchase price.
The Michigan land contract process is as follows:
- Most land contracts will require the buyer to make a down payment of 10% or more of the purchase price.
- Then, the seller will have to make installment payments for a set period of time. The terms can vary, but most agreements are between two and four years.
- At the end of the term, the buyer will usually have a balloon payment due before the final transfer of the property deed takes place.
Advantages and Disadvantages of Land Contracts
As your Michigan land contract lawyers, we can help you weigh the advantages and disadvantages of a land contract for your property.
Some of the advantages to land contracts include:
- The property you have may be easier to sell by allowing buyers to have a land contract. The terms of the contract are designed to be affordable for the buyer and, as the seller, you can set the terms of the agreement.
- As the seller, you will have tax advantages to receiving the revenue from the sale in installments versus a lump sum payment. The money received from the sale will be spread over several years, compared to having to be claimed during one tax year.
- Through the installment payments, you will receive regular revenue and may end up earning more than through a traditional sale because of interest you will receive on the transaction.
- If the seller fails to pay, you can go after the property and receive it back through forfeiture within 90 days, allowing you to sell it again.
While there are many advantages to these transactions, land contracts are not always the best option for every real estate sale.
Some of the disadvantages to land contracts are as follows:
- Once the buyer is in arrears of his or her payments, you can enter the forfeiture process to take back possession of the property. However, the buyer has until day 89 to pay back payments forcing you to lose up to three months of income from the property.
- If the property goes into forfeiture in Michigan, you have no additional options to go after the buyer for recourse of loss payments on the property. You will receive the property back, but the buyer will also not have to pay any additional money for damage on the property.
- As the buyer, you could also be facing potential loss if the seller still owes a mortgage on the property. Mortgages can only be taken out by the seller up to the amount owed on the land contract. However, if the seller defaults on the mortgage this could cause problems as the buyer if you do not learn of the issue until the loan is in foreclosure.
While working as your land contract attorneys we can help you determine if a land contract is the best option for you. We will sit down and go over all the disadvantages and advantages to this option to help you determine the right course of action for your property sale.
Is it necessary to record land contracts in michigan?
It is not necessary to record land contracts, unlike deeds, conveyances, and warranties. They are instead reserved for a buyer and a seller's use only. In negotiations, mediation, or civil court, the land contract is the standard by which decisions are made.
What To Do When a Land Contract Is Paid In Full?
When a land contracts are paid in full, the seller transfers the title of the property to the buyer. To complete the process, they file the necessary legal documents with the County Clerk and Recorder's Office where the property is located. This will be recorded by the Clerk. Once the sale is complete, the buyer is legally responsible for the property.
What happens if a buyer defaults on a land contract in michigan?
The seller regains possession of the property and retains any money the buyer has remitted if the buyer does not fulfill his financial obligations as stipulated in the land contract.
Land Contract Legal Advice for Your Property Sale
Our experienced legal counsel can help you throughout the process of developing a land contract for the sale of your property. Most of the time, land contracts offer great options for buyers and sellers of property where a traditional mortgage is not an option.
However, we can also help if you need to take legal recourse against someone who you already hold a land contract with on an existing property. Sometimes things go wrong in a land contract, and we can help you file the legal paperwork necessary to start the forfeiture process on the land.