Each week, Second Opinion asks two real-estate professionals one of your questions. Read what they have to say, right here.
BUYERS CAN AVOID LOAN RULES
NAME: H. Kent Kidwell
TITLE: Partner, Kidwell, Kent & Curran law firm in Fairfax City
WRITE: Woodson Square, 9695 C Main St., Fairfax, Va. 22031
A land installment contract is essentially a contract for a deed. The contract purchaser makes periodic installment payments to the seller, and when the purchase price has been paid, the seller delivers the deed to the purchaser.
The above theme has many variations and a variety of purposes. Some of the purposes are legitimate and some are illegitimate, as, for example, when the arrangement is being used to "wrap around" an unassumable deed of trust, or mortgage, containing a "due on sale" provision.
Assuming the installment sale arrangement is legitimate, a principal advantage is that the purchaser is not required to obtain a money loan from an institutional lender for purchasing the property and to pay "points" and other loan fees. The buyer also is not required to present a good credit history in order to procure financing.
The principal disadvantage is that legal title to the property remains with the seller, and any judgments, tax liens or other claims filed against the seller become encumbrances on the property - to the detriment of the purchaser.
There are ways, however, to protect the purchase, and anyone thinking about entering into an installment sale arrangement should have legal counsel.
PROS, CONS FOR BUYER AND SELLER
NAME: Bob Gill
TITLE: Senior loan officer, Atlantic Coast Mortgage
ADVANTAGES FOR THE BUYER:
* Buyer does not have to meet normal lender qualifying criteria. …