I have a great Land Contract Opportunity. What am I missing?

[scor68]

What is the name of your state (only U.S. law)? Michigan

Here is the deal. I have an opportunity to buy a home from my mother which she inherited from my Grandfather. My mother owes nothing on the house and is willing to sell it to me at a discounted price. We have talked about writing up a land contract for the sale. My mother is not too concerned about the details of the Contract. Of course I'm not going to burn my mother on this contract but I have the ability to write this contract any way I want. My question is ... what am I missing?

If I we write up the contract with a 0% interest rate that sounds good to me. I'm I missing something? (although I realize that is sort of a tax question)

What should be included in the contract in the event of her death?

Is there another option to the land contract?

Would I be better just having her gift me the house and then just pay her on the side.

Any thoughts on what I might be missing would be great.

Thank you in advance.

 

[HomeGuru]

What is the name of your state (only U.S. law)? Michigan

Here is the deal. I have an opportunity to buy a home from my mother which she inherited from my Grandfather. My mother owes nothing on the house and is willing to sell it to me at a discounted price. We have talked about writing up a land contract for the sale. My mother is not too concerned about the details of the Contract. Of course I'm not going to burn my mother on this contract but I have the ability to write this contract any way I want. My question is ... what am I missing?

If I we write up the contract with a 0% interest rate that sounds good to me. I'm I missing something? (although I realize that is sort of a tax question)

What should be included in the contract in the event of her death?

Is there another option to the land contract?

Would I be better just having her gift me the house and then just pay her on the side.

Any thoughts on what I might be missing would be great.

Thank you in advance.

**A: get a loan and buy the house from her.

 

[scor68]

Why

Thank you for the response, but this is not helpful advice. Why would I get a conventional loan and end up paying interest to a bank when I have the opportunity to avoid that.

Anyone else?

 

[TimStudiesLaw]

Thank you for the response, but this is not helpful advice. Why would I get a conventional loan and end up paying interest to a bank when I have the opportunity to avoid that.

Anyone else?

1) To avoid the appearance of impropriety.
2) So your mother can invest the proceeds from the sale of the house.
3) So there are no issues upon her death.
4) To avoid family issues if you should be unable to pay in the future.

 

[nextwife]

use an attorney to make sure all is done right, and get a title policy, because title has not been updated in many years and likely none of you knows the current condition of title.

 

[tranquility]

A gift tax return is required for the difference between the price you pay and the fair market value of the house. For the amount of the loan, mom must report an "imputed" interest. In other words, she has to report interest income on the amount loaned on her tax return.

Clearly, YOU would be better off if you got a gift--at least in the near term. That is, unless mom has medicaid issues in the near future or creditor issues now. Unless mom is rich, this deal will stink to anyone who looks at it. Tread carefully and get legal advice.

 

[HomeGuru]

Thank you for the response, but this is not helpful advice. Why would I get a conventional loan and end up paying interest to a bank when I have the opportunity to avoid that.

Anyone else?

**A: so the Seller will sell with our charging interest? And in a land contract you do not have legal title.

 

[nextwife]

**A: so the Seller will sell with our charging interest? And in a land contract you do not have legal title.

However, if properly done, and recorded, the buyer DOES have a Vendee's interest, and is legally entitled to deduct interest and property taxes that they pay out. Additionally, the Vendor's options are limited as to their ability to further encumber the property. If one has a recorded LC on an otherwise free and clear property in which the Vendor has good title, they are pretty protected.

 

[HomeGuru]

However, if properly done, and recorded, the buyer DOES have a Vendee's interest, and is legally entitled to deduct interest and property taxes that they pay out. Additionally, the Vendor's options are limited as to their ability to further encumber the property. If one has a recorded LC on an otherwise free and clear property in which the Vendor has good title, they are pretty protected.

**A: very good.

 

[FarmerJ]

There is nothing wrong with buying a home on a contract for deed from a seller. My first and 3rd homes were bought that way. The cleanest deal is to have the contract written up by a atty. ALSO dont do a zero interest thing, it could bite your mom back when or if she needed governmental assistance regarding medical care. What does your county say the home is worth for property tax purposes? If the CD is for close to that amount there is little risk of it being challenged later on if your mom must apply for medical bill help like the kind needed for nursing home care. In your CD it can be set up ahead of time that should the seller pass away during the life of the CD the seller can designate one party to accept the installment payments so that way the buyer is not having to write multiple checks to other heirs. If the value of the CD is high enough are there still investors who buy out CD holders ? this is another thing that can be done if the heirs agree should your mom pass away. ANY way its worth every penny to use the services of a atty when buying a home on a CD this way there are no problems that will bite you later.