Land Contract Procedures for Sellers
If you are looking to sell property via a land contract, it is often difficult to find interested buyers that are willing to complete the deal. Many sellers often get buyers in the door by telling them that they can own a home for less than the cost of renting. Buyers often jump at the deal but when it comes time to put down a down payment of several thousand dollars, they get cold feet, never show up at the closing, and continue renting. Sellers can waste a lot of time, money and energy dealing with buyers who don’t follow through. Here’s what I recommend to avoid wasting your time.
You need to determine if the buyer is serious about buying the property. I recommend having the buyer put down earnest money so that you will take the house o the market for them. If they sign the land contract then you can credit that earnest money towards the down payment. If the buyer doesn’t show up at closing, they forfeit the earnest money. I’ll have to check and see what laws govern the retention of earnest money but I imagine that you can have them sign a document indicating that the money will be credited towards the down payment if they purchase the home or will be retained by the seller if they back out of the deal. You could label it an application fee that would follow the same parameters. The amount would not have to be a large one. It could be $100-$200 – just enough to find out right away if someone is serious about the property.
If you get this far in the land contract process (past the initial deposit), you, as the seller, need to deliver a copy of the land contract to the buyer well before the closing date so that the buyer can review the contract (with an attorney if necessary). If the buyer has any changes or concerns, those can be addressed well before the final closing date. The seller can revise the contract and send it to the buyer again for a second review.
Send the final draft of the contract to the buyer for one last review. With email, getting the contract back and forth should be fairly simple. Once the buyer gives the final okay, the seller should sign two originals of the contract and send both to the buyer. The buyer can sign both originals (keep one for himself/herself) and return one to the seller with a check for the down payment. Or the buyer can do this at a closing and the keys can be exchanged at that point.
If the buyer changes his/her mind, the seller would keep the initial deposit and put the property back on the market. This is how I would recommend proceeding with a land contract with a potential buyer.