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#455485 - 11/17/16 09:12 AM private sale with land contract
Boatswain2PA Offline
Junior Member

Registered: 11/17/16
Posts: 5
Loc: Far far from the ocean
Greetings all,

I have a private offer on a house in Maine, but of course they have poor credit so need me to finance it for them.

I have sold a house with owner financing in another state, and it's working out very well. In that state there are title companies who will do all of the books (buyer sends them PITI + their $25/mo commission, and the title company sends me P&I while holding tax/insurance in escrow).

However I wasn't able to find a title company in Maine that would do that, and my attorney there (who says they are experts in RE) says that's not how it's traditionally done there.

So, I heard about "Land Contracts" that act as a rental until the mortgage is paid off. We have agreed on a sizeable down payment, and 6.5% interest rate that balloons to prime + 6.5% in 10 years (so they will refinance and I get my money out of house).

My attorney is drafting up the contract now, but I am looking for advice and lessons learned regarding what else I should be considering here.

Thanks, in advance, for your advice.

Boats

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#455489 - 11/17/16 09:34 AM Re: private sale with land contract [Re: Boatswain2PA]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7741
Loc: Vermont's North-East Kingdom
Will your Maine Attorney perform those services for something as small as $25.00 per month ?

I am not aware that Land Contracts are legal in Maine; but if so, then it sounds like you're in good hands. I didn't even know that they were legal here in Vermont until I started having to conduct sales involving them.

People who have "bad credit" but also have a "good down payment" are as scarce as Hens Teeth; you're lucky to have run across Buyers like that !

If you do a search using the mechanism in the right hand column, we have had prior discussions pertaining to other problems encountered with Land Contracts. Embed multi-word searches in quotes like "land contracts".
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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#455491 - 11/17/16 09:54 AM Re: private sale with land contract [Re: Vermont]
Boatswain2PA Offline
Junior Member

Registered: 11/17/16
Posts: 5
Loc: Far far from the ocean
No, Maine attorney will only draft the documents and hold the deed in escrow until paid. Buyer will make payments directly to me, and I will withhold tax/insurance. My plan is to build a comprehensive spreadsheet that tracks P&I and send them monthly statements from this.

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#455492 - 11/17/16 10:01 AM Re: private sale with land contract [Re: Boatswain2PA]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7741
Loc: Vermont's North-East Kingdom
How far away from Maine are you located ?

Your stated location (far from the ocean) makes it impossible for me to imagine the logistics involved in working with these people over 10 years or how you'd handle the equivalent of foreclosure in the event that they default.

How did you arrive at a Purchase Price ?
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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#455493 - 11/17/16 10:26 AM Re: private sale with land contract [Re: Vermont]
Boatswain2PA Offline
Junior Member

Registered: 11/17/16
Posts: 5
Loc: Far far from the ocean
I'm a long way from Maine. The logistics of being so far away, and as a rental, is why I want to sell it. I've been able to keep it rented, but lost money every year, mostly due to my negligence from being so far away. Last year was a doozy when a tenant found out the pleasures of meth.

It is a VERY unique house, and located just outside of the major travel routes that very wealthy people take every summer. I did have a realtor give me an estimate, but they (understandably) wanted the house to sell quickly so suggested listing at a very low price. It's been listed on Zillow (yeah, I know Zillow sucks) for many years at the price that I would sell it for (and I felt the right person would pay), and I finally got a bite from a family out of state. Wife literally just saw the picture of the house and said "that's it, we're buying this house and moving to Maine." It really is THAT unique of a house. They both have very mobile jobs and both have found good employment in the area.

We have agreed on the price (almost twice what the realtor suggested), down payment, and interest rate (plus balloon). They have had the house professionally inspected and are happy with those results.

We don't have anything firm in writing yet though, and I fully expect such a complicated deal will still fall through. I am requiring them to send $5K in earnest money with their formal offer (I will have to lose terrific tenants).

Other questions/concerns??

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#455495 - 11/17/16 10:32 AM Re: private sale with land contract [Re: Boatswain2PA]
Boatswain2PA Offline
Junior Member

Registered: 11/17/16
Posts: 5
Loc: Far far from the ocean
There is strong language in the draft contract that once they are 35 days late they move out and forfeit ALL the money they have given me over the life of the contract as rent money. I assume (scary word there) that it then turns into a tenant eviction, with a civil suit from them to attempt to recoup their equity.

I believe (hopefully not erroneously) that I have found great buyers. They are both professionals, and have good stories about why they cannot get a traditional mortgage (life does happen to good people sometimes). Many, many conversations/texts/emails with them and their story is consistent.

I think my biggest concern is they move in, don't pay the mortgage, and trash the house. I have old shipmates in the area who act as property managers and can swing by the property anytime, and they are putting a substantial down payment. I think they are professionals who won't trash the house.

However they have not been so great with their finances in the past, so I think the most likely "bad outcome" here is they don't like the house (they haven't even seen it in person yet) and/or they lose their jobs and can't afford it.

Thank you for your wisdom so far!

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#455496 - 11/17/16 11:54 AM Re: private sale with land contract [Re: Boatswain2PA]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7741
Loc: Vermont's North-East Kingdom
Originally Posted By: Boatswain2PA
". . Last year was a doozy when a tenant found out the pleasures of meth . ."

I gather that the property was never utilized as a methamphétamine production laboratory . . . . I don't think our Building Inspectors are thoroughly skilled in detecting that.

So is your location being kept confidential ?

Did your Maine Attorney verify that Land Contracts or Contracts for Deed are not prohibited in Maine ?

I just ran across this proposed revision of the Maine Statutes dated October 13th, 2016, so I guess something exists . . . . look at Pages iii through v:

Maine Land Installment Contracts; Legislative Revisions
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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#455497 - 11/17/16 12:23 PM Re: private sale with land contract [Re: Vermont]
Boatswain2PA Offline
Junior Member

Registered: 11/17/16
Posts: 5
Loc: Far far from the ocean
Correct, no meth lab. Just a guy who lost control of reality due to meth, lost his job, couldn't pay rent, and then got mad and trashed the house when I began eviction.

I like confidentiality, it is, after all, the internet.

Re-reading the draft contract today, it is titled an Installment Agreement vice a Land Contract.

Thank you for the poignant questions & reference website. Looks like the draft agreement meets all the terms listed there.


Edited by Boatswain2PA (11/17/16 12:50 PM)

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