Land contract is still an option

by Rocket Finance


April 1st will mark the one year anniversary of our move to Colorado and we still own a home in Wisconsin. A year ago, I was discussing the possibility of a land contract purchase offer. Twelve months later and that route is still a possibility.

We have a different set of potential buyers this time and the deal is being brokered by our realtor so I feel a little better about it. Nothing is certain, however, and we continue to pray and keep our fingers crossed. A land contract purchase is similar to rent-to-own, except a certain amount of the monthly payment is applied to principle each month. In essence, a land contract is a seller-financed purchase except the deed is not transferred. Let me compare the three options generally:


Buyer moves in with the understanding that he will be given the opportunity to purchase the property at a future date. Typically, the payments do not reduce principle in this situation. Deed is not transferred until the purchase date and the buyer cannot make major changes to the property.

Seller-financed purchase:

Buyer pays down payment and makes monthly payments including interest to the previous owner. Deed is transferred and the buyer is free to maintain or improve the property as he sees fit.

Land Contract:

Buyer makes a small down payment and then monthly payments to the owner. A contract is signed that includes a promise on the part of the buyer to close on the property on a future date. If the contract is not fulfilled, the house goes back to the original owner and the down payment and previous payments are forfeited. Typically, even though the deed is not transferred, the buyer is free to make improvements on the home.

Every situation is unique, but the above are basic outlines of ways to move a house without an outright sale. So why would a buyer choose one these options? The possible reasons are numerous: the buyer does not have a down payment, the buyer cannot get financing, the buyer’s situation is going to change drastically in the near future, etc.

In our situation, the buyers have a good credit history and enough cash saved for a down payment, however they do not want to apply for credit at the moment because they are going through financing for their small business. A hard pull on their credit right now and the assumption of a mortgage line of credit might place their business financing in jeopardy. Once the business financing is in place, they plan to close on our home.

At the moment, we are working through various scenarios with the help of our realtor. We made one offer that was rejected and last week I made a counter-offer. We sure hope this land contract deal goes through.

If the home does not sell within the next two months, we may have to walk away from it . . .

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