Re: land contracts
From: Richard Pendleton (
Date: Tue, 13 Jan 2009 08:30:24 -0800 (PST)
Regarding Karen's post

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]

From: Karen Ecklund <ecklund.karen [at]>
To: cohousing-l [at]
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

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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