land contract I have tenants that want to purchase the house they are renting…

land contract
I have tenants that want to purchase the house they are renting from me. Though they have bad credit, they pay and have paid excellent/ on time for 2 years. My mother told me to consider a ”land contract”. Could you please tell me what is that, how would it benefit me, and what could I expect in cost to have an attorney draw up the contract? I have a mortgage- first and second on the property with equity remaining.

One thought on “land contract I have tenants that want to purchase the house they are renting…

  1. Re: land contract
    It’s one thing to pay rent on time. It’s another to own a property and make all of the mortgage payments until the mortgage is paid off.

    If you sell the house to your tenants, whether an outright sale with your giving them the mortgage loan for that part of the purchase price that they don’t have. or whether you have a “land contract” which generally requires installment payments over a period of time until the tenant/buyer can get a deed from you], they will own or have an interest in the real property. If they default, you will have to foreclose on them. This will be another expense for you, plus you will still have to keep up with insurance and property tax payments on the house.

    Both the land contract and the sale with your taking back a mortgage [also called Seller financing] are risky for you. You will have lost ownership and control of the property without having been paid for it. Judgments and other liens can attach to the property because of the tenants actions or failure to act, and those will reduce the value of the property that you still own.

    Even with bad credit, the tenants may be able to get a mortgage. If they can, you’re best off with a regular sale to them, and they pay you with the mortgage [from a lender other than yourself] and whatever cash they can pay. That way, you will be paid, you won’t own the property, and it’s not your worry if they default on the mortgage.

    You will need to decide what the purchase price will be.

    You definitely should have agreements drawn up by lawyers, whatever you do.

    Lawyers have different ways of charging their legal fees. Interview the lawyers you are considering, to see if you like them and they like you, and to find out what your cost will be and if you feel that you would be well represented by them.

    Miriam Jacobson
    Law Offices of Miriam N. Jacobson
    1900 JFK Blvd. Suite 1519
    Philadelphia, PA 19103-1431

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