LAND CONTRACTS AND WHY THEY ARE DISAPPEARING FROM THE MARKET
Nearly everyday I speak with someone who wants to find a land contract. They believe that is the only way that they can buy a home. This was a fantastic way to buy or sell property for decades side stepping traditional lending requirements. Many contractors and investors, built business models on buy a home, fix it up and resell on land contract. Terms were negotiable between the buyer and seller and everyone wins right?
Not anymore. Since the Dodd-Frank Bill (2014) came into effect, seller financing is pretty much considered to be quacking the same as the traditional lending duck and "equitable interest services". Thus being held to the same safeguard standards as license mortgage lenders. This means that sellers who are offering seller financing, NEED to somehow prove that the buyer can afford and continually be able to make payments on time.
Simply put, seller financing needs to PROVE on paper that the buyer will be able to commit to this expense in detail just like the banks. This is a huge liability and a new federally funded task force has been initiated to monitor all transactions, and are looking to make examples of people who are doing more than one a year of these seller financing agreements known as "Land Contracts".
What does this all mean? It means that sellers are going to be less likely to offer this as an option when selling due to the legal problems it can cause for them down the road if their buyer fails to be able to make the "mortgage" payment. If a job loss, medical issue, or family tragedy should take place, it could spell disaster for the seller who was trying to help someone when they couldn't get traditional lending.
This is an issue that will become more and more of a stumbling block for people who refuse to get their lender profile in order to be able to take advantage of traditional lending, which offers many more safeguards and better interest rates. Land contracts create many opportunities for predatory lending to take place. If you're looking for a land contract, there are things you need to know about the process and i recommend always using a realtor to make sure you're not getting taken advantage of and putting your investment and family at risk.