Howard Hanna Real Estate
Howard Hanna Real Estate
Berta J. Smith, Howard Hanna Real EstatePhone: (315) 559-3316
Email: [email protected]

Negotiating a Land Contract Vs. a Mortgage

by Berta J. Smith 11/29/2020

Image by Shutterbug75 from Pixabay

With a mortgage, a buyer is applying for financing to purchase the property in its entirety. They're relying on their credit and assets for approval before assuming responsibility of the full property. In a land contract, you're cutting out the need for a formal lender and relying on the seller to approve or deny your application.

The seeming simplicity of the transaction may make some people discount the importance of negotiation. However, there are a few things to keep in mind so both the buyer and seller are comfortable with the terms of the agreement. 

Talk to the Seller 

With a land contract, you may be more beholden to the seller than you would be to a lender in a traditional mortgage. If the seller thinks of you as a tenant rather than an owner of the place, you'll need to discuss their exact involvement over the course of the contract.

Because the seller won't receive the full value of the property upon sale, their financial insecurity is entirely understandable. They may want to check up with you over the phone, in-person, or through a third-party. If you're uncomfortable with the level of oversight, you may need to speak up or find a different property. 

Make sure you understand your obligations during this time. Some buyers are treated as a renter of the property — until it comes time to make significant and costly repairs. If you're responsible for all upkeep, you may be able to negotiate more freedom in exchange for the additional expense. 

Think Through the Finances 

One of the starkest differences between a traditionally financed home and a land contract is the speed of repayments. Even if you do find a seller willing to extend the contract, it can still be a major strain on your finances. As you factor in your current assets and credit score, you should also consider the future.

If the final payment is large enough, it may still require a substantial loan. If your credit hasn't improved enough by the time the contract nears the end, it could be a significant blow to your savings. And if you can't meet the terms of the contract, the seller will get to keep the money you've already paid them (as well as the property). 

Negotiating a land contract means thinking through the repercussions of each clause. While the terms may seem looser than a standard mortgage, there may be strings attached that aren't as obvious at first glance. Ensure that you understand your financial and practical responsibilities before signing on the dotted line. 

About the Author
Author

Berta J. Smith

Roberta J. Smith CNY REALTOR ® - Quality & Service That Stands Out

About me:

• A full-time realtor since 2003

• Specializes in first time home buyers and estate sales

• Understanding the importance of detailed communication with clients

• Consistent Top Producer

• Associate Broker 

• Experienced negotiator

• Lifetime CNY Resident

I have great people skills, especially in a one-on-one atmosphere, and wanted to put those skills to good use. With a career in Real Estate, I am able to help people during one of the most important decision-making times of their life… buying or selling a home. I live with husband and have three children and four grandchildren. As a life-time resident of Central New York, I know my real estate territory very well and will provide the utmost service to my customers. I can tell you all about the school district, the economy of the area, established businesses, landmarks, where to shop and even where you can grab a great burger!

If you are looking to buy or sell a home in the CNY area, including Liverpool, Cicero, Clay, North Syracuse, Baldwinsville, Syracuse & other local markets, I am the agent to call.