One form of alternative real estate financing is called the land sale contract. People wishing to purchase real estate on contract, often lack the collateral and/or credit rating necessary to secure conventional financing. Some sellers like the added advantage of being able to secure the best terms in these types of arrangements, because the buyers often have few other opportunities to buy into the market. These dynamics bring buyers and sellers together.
Indiana courts recognize these transactions as legitimate methods of selling real estate, generally speaking. However, these transactions are less regulated than sales involving conventional financing, and therefore problems are more likely to develop. One common problem occurs when the seller attempts to sell his/her real estate on contract while they still have a mortgage on the home. Most mortgages have a “due on sale clause” which allows the bank to foreclose, if the owner attempts to sell the property. While this may be resolved fairly easily prior to the sale, it is much more difficult, after the sale.
Many sellers are shocked to learn that once a buyer in a land contract defaults, they can’t just have the buyer thrown out like a non-paying tenant. Buyers have many of the same rights as buyers under a conventional mortgage and thus the Seller generally must foreclose on the real estate and then send the house to a Sheriff’s Sale. This leaves the property in the possession of the buyer until the new owner takes possession of the property. It can be an expensive way to recover your money if you’re a seller. Whichever side of the transaction you are on, it is always best to hire an experienced real estate attorney to assist you.
If you are considering selling or buying on contract, give us a call today at 317-939-3000 and find out how we can help safeguard your interests while helping you complete your real estate transaction.
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One form of alternative real estate financing is called the land sale contract. People wishing to purchase real estate on contract, often lack the collateral and/or credit rating necessary to secure conventional financing. Some sellers like the added advantage of being able to secure the best terms in these types of arrangements, because the buyers often have few other opportunities to buy into the market. These dynamics bring buyers and sellers together.
