Land Contract Problem

[olikolik]

What is the name of your state?Ohio

My wife and I purchased a house on land conract about a year ago. Our terms were for two years with 1000 down. We recently went to the bank to get financed early. We found that the appraisal on the house was lower then the price. So now in order to be financed we would be required to put the difference between the sales price and the appraisal plus ten percent of the appraisal due to the bank is considering it a refinance and will only provide up to 90 percent of the houses value.

Long story short, we are not happy with this and would like to look for another house. We have been preapproved from a lender and we need to know what kind of recourse can be brought for us breaking the contract. Should we just stay until the contract is up and tell them we cannot get financing, or if we decide to buy elsewhere and move do we just forfeit our downpayment and all monies and call it even?

Any help is appreciated.

 

[Jettson]

I'm certainly no expert in these matters like many on this forum, but after a lot of my own research and reading these threads I have a few thoughts.

It sounds like the house won't reach the sales price even after it appreciates this year. If that's correct, then you may want to base your decision to move on this dollar spread (sales price minus appreciated value in a year). Will it be less expensive to find another house or stay there, calculating the money you already have invested in the property? You WILL lose your down payment plus any principal paid if you break the contract and that's like expensive rent. Consider a short lease/option contract in the next house if you move, then if you don't want the house you don't have to buy it.

 

[olikolik]

We are okay with losing the money, as it will be a small lesson learned compared to what we would be losing by buying the house and trying to wait for the price to come back up. We have decided to definitely move out, but th eproblem we are facing is whether we have to live here the full 2 years as in the contract and just tell them that we cannot be financed due to the appraisal, or can we decide to break the contract now without fear of reprisal.

We are not sure if a land contract can be broken by either party and if we break it can they then sue us for the monies that they would of recieved for the next year if we had stayed?

Thank you for any information.

 

[HomeGuru]

Have an attorney review your contract.