Re: LAND CONTRACT - Posted by Jim Kennedy - Houston, TX
Posted by Jim Kennedy - Houston, TX on July 19, 2001 at 17:52:11:
Stacy is right. Legal title passes to the buyer upon satisfaction of the terms of the contract and the buyer holds equitable title until that time. Keep in mind though that the terms of the contract are negotiable. A land contract can be (and usually is) constructed so that the buyer receives the deed only after the ENTIRE purchase price has been paid. However, a land contract can also be constructed so that the buyer receives the deed after a SPECIFIED PORTION of the purchase price has been paid.
Example: Seller owns a free & clear property worth $100K. Seller is willing to carry a 1st as long as buyer puts down 20%. Buyer only has $5K for down payment, so seller says, ?OK Mr. Buyer, I?ll accept your $5K now and let you take possession of the property. But I?ll retain title until you’ve paid your loan down to $80K, at which time I’ll give you a deed to the property.? They then draft a contract spelling out the agreed upon terms and conditions. Once the buyer fulfills the terms of the land contract, the seller then transfers title to the property and carries back a first for $80K. At this point, the land contract has been satisfied and is basically extinguished, having been superseded by the deed and debt instrument (mortgage or deed of trust, depending on what State you’re in).
Another thing to keep in mind is that once the deed is transferred, the rules for foreclosure are generally different. The laws governing land contracts vary from state to state.
Hope this helps.
Best of Success!!