There are many things that will determine whether you should consider selling your property on a land contract. The quality and desirability of the property, the quality of the market, the number of sellers in the market, consumer demand in your area, and your motivation for selling the property. If you are a motivated seller competing to sell your home, you may want to consider selling on a land contract. There are some benefits as follows:
1. If you sell for sale by owner and offer a land contract, you eliminate real estate commissions and increase the number of prospects who will be interested in buying your property.
2. Selling on a land contract gives you a way to receive a steady stream of income over the life of the land contract. In this way, you have the benefit of the final property until the contract is fulfilled and the income stream as a rental property.
3. Many times people who buy properties in a land contract will invest money to improve the property, such as new windows, carpets, and other improvements that increase the value of the property during the land contract.
4. Buyers will be responsible for the proper management of the property during the term of the land contract and will pay for all maintenance including catastrophic repairs such as HVAC and roof repairs. Once again, increase the value of the house during the land contract.
5. In the event that a buyer defaults on the land contract for any reason within or outside of their control, they can repossess the property, often with a substantial increase in value due to improvements made during the land contract .
6. You should consult your account or attorney, but you should be able to avoid or minimize capital gains tax because you are receiving payment streams and not a lump sum payment.
7. You can have your attorney draft a land contract specifically tailored to the wants and needs of the buyer and yourself in the short, medium, and/or long term. For example, as a seller, you may want to defer the collection of the property for 5 or 10 years and you can structure such an agreement with the buyer by securing a balloon loan, say, in the fifth year.
The sale of land by contract is not for everyone, but it is a good alternative to take into account to expand the possibilities of sale.
For your success!
Copyright © 2006 James W. Hart, IV All rights reserved