This is the second part in my three part series on Land Contracts in Michigan. This one is entitled: What each side should expect in a Land Contract. In part one, I covered the basic outline of land contracts in Michigan. When working with a Land contract in Michigan, it is important for both sides of the transaction to know some key information to help them avoid future trouble with title and ownership. Although there are many points to this buying and selling process with Land Contracts in Michigan, that an experienced Realtor can help you with, it would be wise to examine a few things when approaching such a transaction.
So here is a list for both the buyer and seller of a potential Land Contracts in Michigan, and what each side should expect, and look for to protect their interests.
1) You should save some money, and realize that you will need a down payment of some kind to offer the seller. Be cautious of any deals that do not require a down payment, as it may be too good to be true.
2) Make sure that your payment calculations of what you can afford also include taxes and insurance, because as the buyer, these now become your responsibility, and most land contracts require that you present proof to the seller of these being paid on an annual basis.
3) Make sure the seller records the land contract at the County. Why should you do this? Because if it is recorded, you have an ownership interest in the property and can proof your title to the property much easier if something should happen to the seller during your contract period.
5) Pay for and obtain a title insurance policy before you sign for anything. This insures that the seller has a right to in fact sell you the property, and there are no liens, mortgages, etc. on the title.
1) Do a full application and review on any prospective buyer. As someone who is offering a form of seller financing,
you have a right to require they present credit reports, income and financial statements, and verify employment. Also check public records for judgments, child support garnishments, criminal history, etc. A prospective applicant can look good on paper, and present a good income source, but public records such as garnishments and child support can give a much clearer picture of how much they are taking home in actual pay each month. Further, a repeat offender in the criminal justice system or one with a pending incarceration might not be a candidate that you can expect to make his or her monthly payments.
2) Be cautious of applicants without income. Also if their source of income is a form of government subsidy such as social security, workman’s comp, unemployment, insurance settlement, etc. You will want to have them provide proof of the length of time of the payments they are to receive, and make sure there is evidence that it will carry through the length of the contract.
3) Require a down payment. The more sizable the better, as this makes for a more responsible homeowner who is more likely to take care of the property and be motivated to make his or her payments on time so they do not lose their investment.
4) Require a full year’s home owners insurance paid and presented, before any contract is signed. Require that they present proof of payment of annual insurance and property taxes every year, and make sure this is defined as a constituting a condition of default in the land contract itself.
5) Record the land contract and make sure the tax bills are sent to and paid by them. Payment history can usually be checked online, and this should be done annually or semi-annually depending on the billing cycle of the tax collection department.
Working with an experienced Realtor who can help you through this transaction can be vital to help you avoid problems, and overlook important details that can create problems down the road. For help with Land Contracts in Michigan, especially in the Southwest Michigan area, contact me at: www.michaeldelaware.com.
For more information on this subject, download my eBooks for Kindle available on Amazon.com. The two titles are: Understanding Land Contract Homes: In Pursuit of the American Dream and Land Contracts for Investors.