Buying land on contract-to-deed; what to know?
October 10, 2011 5:49 AM   Subscribe

Buying land on contract-to-deed; what to know?

I was offered quite a bit of land (80+ acres, undeveloped) at a very attractive price. It's an attractive price due to the desire to keep it in the family. However, I have no idea what to do and while Google is great, nothing replaces actual experience.

The things I know to do:
1) Get it surveyed to make sure the price is fair, check out the soil quality, and get a topography map drawn to see any potential issues or underground streams.
2)Check utility development costs
3)Ensure it's zoned correctly, play around at the courthouse to ensure no highways are planned

Besides this, what else should I know before considering the purchase?

The financing type would be contract-to-deed which I haven't started researching yet, so is there anything immediately that I should be aware of with this type of financing? It would be financed through the family, but lawyers would be involved for everyone's protection.
posted by lpcxa0 to Work & Money (2 answers total) 1 user marked this as a favorite
This is pretty dangerous territory so lawyer up with a lawyer serving your interests and only your interests. Let the other family member get their own lawyer.

Know that most land contracts favor sellers. You may want to discuss this and the potential pitfalls with a lawyer before going any further with the family. One big issue for buyers is that the deed remains with the seller and liens can be added. These put the lien holder in front of you in a bankruptcy or foreclosure against the seller. What if the seller goes bankrupt? They could lose that asset and thus you would too. Many land contracts are not recorded. Only foolish buyers follow such a path. One reason to not record is because the seller's mortgage does not allow land contracts and their existence could cause the loan to be accelerated, that is all payments due now which of course usually leads to foreclosure and loss of the property. Many land contracts have allowed sellers to keep the property in the case of of a breach by the buyer, and not have to repay the payments already made, or be unable to make such payments. My recollection of how this plays out is hazy, but ask your lawyer. You really need a good lawyer if you want to do this, and even then it is quite risky.
posted by caddis at 7:30 AM on October 10, 2011

I bought an old house and some land in upstate NY with a land contract. I bought it from a close friend, and I did hire a lawyer to draw up a contract. The danger with a land contract is that failing to pay can cause you to lose the whole thing and you don't have any equity in it until you've paid it off completely, regardless of how much you've spent on improvements. I did pay it off, so it all worked out, but there were a few times when I could not come up with the payment and if the seller hadn't been such a good friend I would have lost my home.

Another thing you might want to check is whether you can sub-divide it, something you might want to do if you have children. The zoning on my land would not allow it to be cut into three pieces. One of my three kids now owns it, the others gave him their share.
posted by mareli at 11:39 AM on October 10, 2011

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