Land contracts and due on transfer clause
We are negotiating a land contract with another couple. We were worried because we heard that they has an existing mortgage on the property. He says that it won’t be a problem although he can’t get it in writing from the mortgage company. This is why he says it won’t be a problem:
”If you were to buy the house from us via land contract, the deed would not get transferred until the land contract was paid off. As such, there is no assumption to worry about. The prevent the bank from having a problem with the ‘sale of interest’, we would simply put the land contract in escrow rather than recording it. Doing so would be in your best interest and it would ensure that the deed it immmediately released…”
Is this true?
Re: Land contracts and due on transfer clause
Most recent mortgages have a clause that would prevent such a sale of interest. That doesn’t mean that it still doesn’t happen every day.
If you decide to enter into a land contract with these people you would want to have a land contract recorded and escrow the deed with a title company (to be released to you on full payment of the land contract). Escrowing the land contract would not protect your interest with regard to subsequent sales. Of course, there are other documents which would accompany this transfer which are beyond the scope of this reply.
Don Darnell
Darnell & Lulgjuraj, P.C.
311 Weiser Way, Chelsea Clocktower
Chelsea, MI 48118