|Re: land contracts||<– Date –> <– Thread –>|
|From: Richard Pendleton (rmp011verizon.net)|
|Date: Tue, 13 Jan 2009 08:30:24 -0800 (PST)|
Regarding Karen's post http://lists.cohousing.org/archives/cohousing-l/msg29432.html Thanks for the information from your development attorney regarding land contracts. This sounds somewhat like a seller financed short-term mortgage with a balloon payment (but it is not a mortgage). Is there some advantage (over a mortgage) to the development company and/or the buyer to this land contract approach however? Is it that if the payment cannot be made, the develop co. doesn't have to foreclose? Does the develop co. still own the unit during the 9 month period, even though buyers are living in it? ------------------------------ Richard Pendleton Nubanusit Neighborhood & Farm rmp011 [at] verizon.net 603-924-7491 www.peterboroughcohousing.org ============= From: Karen Ecklund <ecklund.karen [at] gmail.com> To: cohousing-l [at] cohousing.org Date: Wed, 24 Dec 2008 09:45:55 -0600 Subject: Re: [C-L]_ land contracts From Karen Ecklund, Arboretum Cohousing, Madison, WI: I checked with our development attorney about how we put together our land contracts to assist with buying into our community during this challenging time. Here is her response: Land Contracts at Arboretum Cohousing Land contracts (at least in Wisconsin) are a form of temporary seller financing. Basically under a land contract the buyer pays the seller a certain amount a month for a limited period of time. At the end of that time, the buyer must complete the purchase by paying the outstanding balance. Usually a buyer gets financing to do that, or the buyer could use the proceeds of a sale of another property (or a combination of both). At Arbco our development corporation has agreed to let buyers who have paid $10,000 in earnest money (and in many cases prepaid substantial amounts for unit upgrades) to buy on land contract for a period of up to 9 months. This period ends August 1, 2009. The intent is to allow financially committed people who have been with the group for some time but who have been unable to sell their houses to move into the community while trying to sell their houses. To make this arrangement financially possible for these buyers, we have offered the land contracts on terms that do not fully cover our carrying costs for these units. Specifically, the buyers pay only property taxes, utilities, and condo fees for 6 months, and then add 3% interest for the last 3 months. We are only able to do this because we had some extra room in the budget, and because the bank providing our construction financing agreed that this is a good idea in the current difficult real estate market. The alternative would be to "cut loose" these buyers and look for others to replace them - others without houses to sell. The land contracts require the Arbco buyer to close on their Arbco unit within 30 days after closing on the sale of their house. If the buyer has not been able to sell their house by August 1, 2009, the unit will revert back to Arbco ownership, and we would need to look for a replacement buyer at that point.
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