Owner Financing Summary Highlights In this day of tightening bank and lending financing, sellers may be in a position to offer “Owner financing” to assist buyers. Owner financing can take different forms but we are speaking specifically of Land Contract Terms.
LAND CONTRACTS
A Land Contract follows a purchase contract and specifies how a property is purchased based upon the negotiated purchase contract. An Attorney will prepare this document for about $250. The document is on behalf of both buyer and seller. Here is how it works. A buyer offers to purchase a parcel of property from a seller via a purchase contract. In this contract all of the terms and conditions of this purchase are negotiated including the terms of the land contract. Within these terms are price, amount of down payment, time of the loan with or without a balloon payment, loan amortization and interest rate paid by buyer to seller.
BUYER BENEFITS
The benefits to the buyer of owner financing include a reasonable down payment of typically 20% or less, no bank fees, no waiting while the bank decides on your loan and the interest rate can be competitive with most banks.
SELLER BENEFITS
Seller benefits include the ability to make their property more marketable, deferment of a portion of the capital gains tax, interest earnings on the balance due the seller, regular monthly payments and a more favorable closing time vs. a bank loan.
LEGAL ISSUES
An attorney must provide all of the legal advice and compilation of the contracts for Owner Financing in Michigan.
FINANCIAL ISSUES
A CPA should advise both parties as to the tax implications of these transactions.
REAL ESTATE BROKERAGE ISSUES
Your Northern Michigan Land Brokers agent can provide assistance with any real estate matter regarding owner financing.
