How does a promissory note work for a title to a house?

Question

I called a lawyer wanting to set up a consultation to set up a land contract to buy a house. He said his preference for me, and the owner I'm buying from, would work better if a promissory note was signed and a title search was done. He said in the end I would have the title and own equity, but the owner would own the house and it'd be like a lien til I paid it off.

Does this make sense? Do you think the owner is likely to go this route rather than the land contract?

Answer 1

Yes... it make sense... what you're doing is buying the property on contract. It's a great way for many people you have less that perfect credit or maybe just no down payment to own property. It's only slightly different from getting a loan from the bank. Because in reality, when you get a loan from a bank, the bank actually "owns" the property until you pay it off. The only real risk involved in signing a promissory note is that if you are unable to make the payments in the future, many of them have a clause that says that the orignal owner gets the property back, and they keep everything that you've paid to date. Whereas a bank loan will normally afford the the opportunity to try and sell the property yourself and allow you to realize the equity you might have built from your monthly installments. Understand those risk and only go into an agreement of this type if you can't obtain a bank loan, for some reason... and you know for sure that you will be able to make the monthly installments to pay it off.