How much interest do owners usually charge when selling a house on land contract?

Question

Also, what other ways can the owner screw me over? I am going through an attorney to have all of the paperwork done/registered, but I need to know of what I should add to the contract to protect myself.

Answer 1

The owner knows there is a reason that you aren't going through a bank, so they will charge you higher interest than current mortgage rates. Their risk is higher that you will default if a bank won't give you a loan.

Make sure the former owner doesn't have any rights to enter the property without your permission (unless you default). That they must go through legal channels to foreclose on you, they can't just change the locks on you. That, if foreclosed on, any proceeds that do not go to pay off the loan and other costs associated with the foreclosure, are paid to you.

My last suggestion would not be part of the contract. When you make your payment each month, watch for your check to clear the bank. If it hasn't cleared within a couple of weeks, call them and make sure they got it. If they say no, tell them you will put a stop payment on the original check and get them a new one immediately. This may help keep them from just holding your check and then claiming you never paid, allowing them to foreclose.

Sorry this sounds so negative, but you wouldn't need this kind of information if everything was perfect.

Answer 2

Oh another thing or two, make sure you record your land contract down at the Register of Deed.

Also, make sure the owner pays the underlying mortgage. I've seen it where the owner doesn't pay the mortgage but keeps taking money from the land contract vendee and then bam foreclosure happens and the land contract vendee is then kicked out of the house.


El