So You’re Thinking of Buying a Home on Land Contract – Detroit Eviction Defense gives guidance

Questions to ask, tips to follow, and pitfalls to avoidIf you’d like to become a homeowner but are unable to obtain a mortgage or pay cash for a home, you’re probably going to have to decide whether or not a land contract is right for you. Land contract buyers have different rights and responsibilities than tenants, and land contracts are different from mortgages in important ways.Land contracts can be attractive, but you should take care that you understand the terms of the contract and the obligations you are taking on before you sign. This guide is meant to help you get started in doing just that. This is a short introduction and doesn’t explain every aspect of land contracts, and it probably doesn’t touch on everything that might be relevant to your situation. But it does cover some key areas that are often overlooked by land contract buyers.Talk to a lawyerIf at all possible, you should consult with an attorney before signing a land contract. Luckily, there are local agencies which provide free legal advice to people in certain situations. These agencies may or may not be able to provide you with all the help you need, but they are a good place to start.United Community Housing Coalition2727 Second Ave. Ste. 313Detroit, MI 48201(313) 963-3310Lakeshore Legal Aid2727 Second Ave. Ste. 318Detroit, MI 48201(888) 783-8190Michigan Legal Services2727 Second Ave. Ste. 333Detroit, MI 48201313-964-4130Legal Aid & Defender Association613 Abbott St,Detroit, MI 48226(313) 967-5555What is a land contract?A land contract is a written agreement to purchase real estate which provides that the buyer will pay the purchase price in installments to the seller and will not receive the deed to the property from the seller until the entire purchase price is paid plus any interest or fees accrued.Inspect the condition of the propertyUnlike tenants who rent their homes, land contract buyers usually buy their properties “as-is” and the seller is almost never required to maintain the property or make repairs during the life of the land contract. For this reason, you should inspect the condition of the property inside and out to make sure that you are satisfied with it. Consider hiring a professional to inspect the property for plumbing or electrical problems that might not be obvious. Keep in mind that if there is anything that needs fixing, you will be the one who has to fix it unless the land contract says otherwise.Make sure that the seller actually owns the propertyMake sure that you’re buying from someone who actually owns the property. It’s best to pay a title insurance company to check this for you, but you should at least check who owns the property yourself at the county register of deeds. Sometimes figuring out who has legitimate title to a property can be difficult for someone who doesn’t have experience in real estate, so be careful when doing your own research. Check for liens, mortgages or other recorded documents that may affect title to the property.Get it in writing and record a memorandumLand contracts must be in writing and signed by both parties. When it comes to the terms of the agreement, what counts is what’s in writing – not what the seller might have told you in person or over the phone. So if you want to be able to make sure that a seller keeps one of their promises they’ve made to you, make sure it’s in the written agreement that they’ve signed.Land contracts do not need to be recorded with the county register of deeds, but the seller should sign a memorandum of land contract and have it notarized so that the memorandum can be recorded with the county register of deeds. This way there will be a public record of your status as a land contract buyer of the property. A memorandum of land contract is a document that notes the existence of a land contract between two parties regarding a certain property.Escrow the deedIt’s a good idea at the start of a land contract to have the seller sign a deed granting legal ownership of the property to the buyer and have it held in “escrow” by a broker or real estate agent until the contract is fully paid. That way, the deed can still be recorded even if the seller for some reason becomes unavailable or unable to sign the deed by the time you pay off the contract.Is the price right?Sometimes the purchase price for a property in a land contract is much higher than the actual market value of the property. For this reason, you should hire an independent appraiser to judge the market value of the property or at least do your own research as to what similar homes in the area have sold for recently.Take interest in the interest rateLand contracts can charge up to 11% in annual interest. Keep the interest rate in mind when estimating how long it will take you to pay off the purchase price and how much you will eventually have to pay to get the deed to the property.What are the payments?Most land contracts have a down payment that you make at the start of the land contract relati

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