A big difference between a land contract and a rental option is what the buyer or seller wants. A land contract is a form of owner financing that can be very tempting for a buyer who sees no way to secure financing in the foreseeable future. But depending on the payback period, the seller won`t see most of the money in the coming years. Most sellers will prefer a rental option because the full purchase price must be paid with a mortgage between 18 and 36 months, depending on how the contract is written. A land contract is a document that sets out the conditions for the purchase of free land in exchange for money or exchange. A land contract, similar to a standard purchase and sale agreement, describes the agreement between the buyer and seller, including all conditions, contingencies and due diligence periods. Land contracts are a very popular way to transfer property, with 397 land contracts registered in Muskegon County in 2012. The most common use of a land contract is to provide short-term financing to the seller when a potential buyer is unable to obtain traditional bank financing. Both parties must have sufficient opportunities to review the agreement that has been reached. As proof that this review has taken place, each page of this Agreement contains two lines at the bottom of the page. When checking the completed page, the buyer of the land must initialize the blank line « Buyer`s initials ». Similarly, the seller of the property must also enter the « Seller Initial » line at the bottom of each page to prove that they have reviewed each completed page.

This task must be carried out for each party after completing the information requested by it and before those parties execute those documents by the deed of signature. Any seller, buyer and agent participating in the sale of land documented above must complete a designated signature area for that part. This document creates a signature area for two property sellers, two buyers, and two agents. If one of these categories requires more than two signatures from the group, you can copy and paste additional signature boxes if necessary. At least one land seller and one land buyer must enter into this agreement in order to execute it. The first party that has this possibility is the land seller. If these documents accurately represent what the seller of the property accepts, he must have the current « date » in the first line under the heading of the « XXXIII Signature » section, and then sign his name in the « Seller`s signature » line. In addition to the signature, the seller of the land must print his name on the following line « Print name ».

With a lease, the transaction is structured in such a way that the buyer has the opportunity to purchase the property at the end of the contractual period at a predetermined price. In a land contract, the buyer buys the property from the beginning, with the seller entitled to a lump sum payment at the end of the contract. In both cases, some or all of the buyer`s monthly payments, as well as money paid in advance, are included in the purchase price to help the buyer build up equity in the property. If everything goes according to plan, a land contract can be a win-win situation for both the buyer and seller. The buyer can start building the equity in a home and improve their credit score, while the seller can receive interest payments. Unlike an owner-tenant relationship, the seller is often no longer directly responsible for maintaining the property because the buyer owns the appropriate ownership of the property. In a typical lease-to-own configuration, the incoming farmer (tenant) pays rent to the landowner so that the tenant can start working on the land and invest in the eventual ownership of the property. The landowner remains the owner of the land until certain payments have been made and/or certain other conditions are met, and then the tenant becomes the landowner.

Although this Agreement operates in accordance with its content, certain « Additional Terms and Conditions » may need to be consolidated. If so, use the optional section of the article « XXXI. Additional Terms and Conditions » to remove any restrictions, restrictions or benefits that apply to one or both sellers or buyers of land. If no such provision needs to be explained and this Agreement constitutes the entire Agreement, you may strike this section or indicate the word « None ». Article IV Purchase Price and Conditions » includes the amount of the purchase price. The dollar amount that the buyer of the land must remit to the seller of the land to take possession of the property in question is a mandatory report in this agreement. To do this, look for the blank line that contains the term « . Buying the property by payment of » leads to the indication of the numerical value of the sale price of the land. Also, document the selling price by writing it on the blank line before the word « dollar. » In a lease and land agreement, the buyer makes regular monthly payments to the seller and not to a bank or other financial institution.

After a period specified in the lease/purchase agreement – often two to five years – the buyer repays the balance of the sale price by taking out a regular mortgage on the property. An option-to-own lease requires the landowner and tenant to understand and agree on several key issues, all of which should be included in the lease: In most agreements, there is a due diligence phase that allows the buyer to conduct tests on the property to ensure it can be used for the buyer`s intentions. This may include conducting environmental testing, obtaining local government permits, or other contingencies listed in the agreement. The ninth element, entitled « IX Survey, requires a definition of the number of « business days before closing » that the buyer of the land receives to inform the seller of the land of any surveying issues with the land that must be resolved in order for the sale to continue. Write down this number of days in the line after the word « No later than… » The number of days before closing when the seller needs to resolve surveying issues with the property should also be documented. The term « . To Remedy Such Defects Within » leads to the blank line in which this number of days should be entered for display for rectification or rectification. As a rule, there are costs associated with the sale of land, which must be paid for it to be carried out. For example, a title search may be required, admission fees in the local jurisdiction, etc.

The decision as to whether the seller or buyer should bear these costs in a timely manner is set out in Article VI. Closing costs, with one of the three checkboxes checked. Therefore, select the Buyer check box if you want the buyer of the land to pay the closing costs, select the Seller check box if the seller of the property has to bear the closing costs, or select the « Both parties » check box if the buyer of the land and the seller agree to share the closing costs of this land sale. A ground lease option is a clause in a real estate contract that gives the tenant or tenant the right, but not the obligation, to extend their use of a property beyond the period specified in the contract. As a general rule, the tenant or tenant must pay a premium for the option. B for example a small amount of money in each year of the initial contract. In a lease, the buyer loses any money paid in rent and in advance if he is unable to meet the rent payments or cannot obtain regular mortgage financing to complete the transaction at the end of the contract term. In a land contract, buyers in these situations can still retain a stake in the property, depending on state law. The premium or additional fee for this option can be $200 per month for the 10-year period, bringing the total cost to $5,200 per month. If the tenant exercises the option at the end of the initial 10-year period, the lease payment remains at $5,000 per month. Finally, the main shortcomings of land contracts also apply to leases with an option to purchase.

In particular, if a buyer is no longer able to qualify for a regular mortgage, there is a good chance that they will still not be able to do so after the contract period expires, although many assume that their finances, loans or equity positions will have improved by then. Plus, it`s usually a more expensive way to buy a home than through a normal mortgage. A land contract generally provides for a deposit of about 10% of the purchase price, a duration of between 2 and 4 years and a lump sum payment of the balance due at the end of the term. The idea is that the buyer will be able to clean up their loan during this period and then be able to get traditional bank financing for the remaining balance. Read the rental section to learn more about the basics of leases and why it`s important that leases are written contracts, not handshake contracts. What`s similar between the two contracts is that both usually include a lump sum payment within two and four years. With a land contract, the buyer accumulates equity during these years. With a rental option, the tenant has the exclusive right to purchase the property during the term of the contract, but generally does not constitute equity. In a land contract, title is not transferred until the purchase is completed (usually the buyer ends up taking out a mortgage).

If things don`t go as planned, the land contract becomes more complicated because the buyer has equity in the property. A rental option is easier because if things don`t go as planned, the contract expires and both parties leave. The second article to focus on is « II. Legal description ». The wording used in the first declaration puts on paper the physical size of the country. Find the blank line after the phrase « . A total gross area », then enter the number of « square feet » or « acres » that make up the land as content. Once you have recorded this number, indicate whether it appears as « square feet » or « acres ». The following example is for a 100-acre lot. .