You may be thinking of buying a house. Throughout your search for your next home you may come across homes for sale on a land contract. So, what exactly is a land contract, and is it a good idea to enter into one? Top Bloomfield Hills attorneys from the Cronin Law Firm answer this question below.
What is a Land Contract?
To put it simply, entering into a land contract essentially means that you are buying a plot of land, and the house that sits on, without a mortgage. This can seem like an attractive arrangement for buyers because it means they will not have to go through the hoops of qualifying for a mortgage through the bank. It is especially attractive for sellers, because they can usually sell the house "as is" and they don't have to worry about making any repairs to defects that may exist in the home. Also, when a house is sold using a land contract, the title usually remains with the original seller until the terms of the land contract are fulfilled. In theory, this means that even if you miss a single payment, subject to a redemption period, the seller can trigger an acceleration clause and demand the rest of all your payments in one lump sum.
Buyers also cannot rely on many implied warranties, such as the warranty of habitability, because under Michigan law, those are typically inapplicable with land contracts. To provide context, the warranty of habitability usually provides that one must provide necessities such as a working sewer system, heat in cold weather, or drinkable water. Other issues that can come up when purchasing a house via a land contract is that the person selling the land may not have perfect title, or may have already given someone else superior interest in the land.
Therefore, when you enter into a land contract you give up a lot of rights, and take a lot more risks, that are typically provided to conventional buyers. However, if you choose to move forward with a land contract, you will want to make sure the contract is airtight, your title is perfect and make sure you are not falling into the common pitfalls we see on a daily basis.
Contact Top Bloomfield Hills Attorneys Today
If you are looking to buy or sell your home, or protect your assets, contact the top Bloomfield Hills, Michigan attorneys at the Cronin Law Firm today for your free initial consultation.