I got a call this morning from a woman with an emergency.... 

She sold her house on contract 2 years ago and is now facing foreclosure.. (and a city fine for her grass being too tall.)

I'll call her "Elma."

Elma got a contract from her "buyer" but did not get a downpayment.  She didn't even get a schedule of payments..... (I suppose the contract may have touched on the address of the property but not much else.)

 

The "buyer" was supposed to make payments directly to Elma's bank.

OhForHeavensSakeCouldThereBeAnyIdeaWorseThanThis????

To make a (fairly long) story short:

The bank is now foreclosing on Elma because they have not recieved a payment in a loooong time.

Elma has lost the contract with her buyer.. and her buyer is REFUSING to produce her own copy of the "contract."

Several issues here..

If you have a "special" property that you are having trouble appraising or getting qualified buyers for.. you MIGHT consider a Land Contract.. or selling On Contract (same thing.)  It's not my first option for you.. it has it's dangers.

 

But here's what to do if you go that route:  Consult either a Realtor or an attorney.

 

The buyer should put down a hefty downpayment that you (the seller) will keep regardless if they (the buyer) default on payments.

There should be a designated amount of time for the buyer to pay off the entire balance.. 1 year, 2 years, something you both agree on.  That is -- the buyer will obtain a mortgage at the end of that time and pay the seller the balance due.

A schedule of payments should be established and this should include an agreed upon interest rate.

There are still many more nuiances to be determined in a Land Contract or Contract Sale.. it's definately more than Elma telling her buyer "Send your payments to my bank."  Even if the buyer actually followed through.. that would be "illegal." 

You are not allowed to assume another person's mortgage unless they have a mortgage that specifically allows for that.. and chances are.. they don't.

 

I had another couple once call me ..They had received an eviction letter from our office at Coldwell Banker that handles repos.  They couldn't understand what was going on because they had a piece of paper that a friend of theirs had handed them and that paper clearly stated that they now owned this house.  Infact, they had renters in there!

Questions you might ask yourself if someone ever hands you a note like that:

Do you have a mortgage on the property?

Is the mortgage current?

Who is to pay the taxes?

Who is to pay the insurance?

How do I go about putting the house in my name?


And last but not least... Why are you handing me this note?