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JD, Lawyer
Category: Real Estate Law
Satisfied Customers: 1335
Experience:  Over 11 years litigation experience including eminent domain and real estate disputes
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What issues do you foresee with purchasing a business with

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What issues do you foresee with purchasing a business with the property under a land contract of a 20 year duration?
Are you just worried about the land contract or is there some other issue you wish us to address? I assume this is a 20 year installment land contract or contract for deed and the payments are current.
Customer: replied 7 years ago.
I have not entered into an agreement as of yet.
I guess my question is would I be able to make improvements to the structure as if it were a mortgage?
Also, can land contracts be paid off early to receive the deed and own the property? In this case, my intentions are to have the funding in 10 years and would like to pay it off early and own it.
As long as I make the agreed payments on time, would it be the same as a mortgage?

It is not the same as a mortgage.


However, you can create a land contract to purchase a piece of real estate with any provisions you see fit. They are much more versatile than traditional mortgages in that they can contain whatever payment and possession features the parties desire.


The key difference and disadvantage to a buyer with installment land contracts is that you do not build equity in the property until it is paid off completely. This means that if you fall on hard times and miss a payment, the contract is breached and the property will revert back to the seller. This can be a very harsh reality for someone who has made several years of payments (which would then be considered rental payments). With a mortgage you get to keep the equity (sale value less remaining debt) but with a land contract you lose it.


It's about that simple.


I do strongly advise spending a little money and having a local lawyer draft your contract. Forms rarely cover the concerns of both buyers and sellers. Even if you have to pay the fee yourself (hopefully the seller will pay it) you should have lawyer walk through each provision with you to insure you know exactly what risks you are taking in this deal.


Please reply if I can help further.



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