A land contract is a form of seller financing. It is similar to a mortgage, but rather than borrowing money from a lender or bank to buy real estate, the buyer makes payments to the real estate owner, or seller, until the purchase price is paid in full. This is called “seller financing” and when it comes to one of the most important assets in one’s life, there is no such thing as a simple land contract.
In Michigan real estate law, signed land contracts are legally binding and can contain many different forms of agreements. When all payments have been made the buyer will be deeded the property.
Common problems with Michigan Land Contracts are:
1. The deed remains in the seller’s name until all payments of the agreement are made, between time of initial contract and payoff, which can take years.
2. The price is set and the payment schedule may not be amortized evenly, with a balloon or large payment at the end.
3. Several years may pass where the parties may forget the original intent of the terms.
How Are You Affected?
Some people consider a land contract as a “lease with an option to buy.” Certain states have slightly different legal rights for buyers and sellers. As a result, the land contract can be difficult to understand.
A land contract buyer and seller must be very careful to ensure that the terms of the contract are legally binding to prevent future disputes from occurring. A seller’s remedy to unresolved disputes is to collect on land contract by forfeiture. If provisions in a land contract allow, then a land contract can be foreclosed upon. A buyer’s remedy is to sue for breach of contract or a judge may award the time to redeem property.
How Can We Help
Land contracts are legally binding agreements. Whether you are buying or selling a home on land contract, the performance of which requires substantial length of time. It is in the best interest of both the seller or buyer to involve a real estate attorney like David Soble to help you navigate through the federal and state laws governing land contracts, the process and the common terms of the contract. This can help prevent later disputes that may occur and give both parties peace of mind. Remember, the expense to clean up a mess is far greater than the expense of having it done right in the first place.
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