nikcse

buying on land contract, can seller's creditor put lien on property?

Recommended Posts

We are thinking about buying a property on a land contract from a friend who is in financial trouble (in Ohio).  Our credit is improving, but not the best.  We discussed purchasing the property on land contract now, and in another year we should be able to get a good interest rate to buy it outright.

 

My question is:  If we sign a contract for deed and register it, would his creditors (ie credit cards companies) be able to put a lien on the property?  

 

Thank you,

 

Share this post


Link to post
Share on other sites

We are thinking about buying a property on a land contract from a friend who is in financial trouble (in Ohio).  Our credit is improving, but not the best.  We discussed purchasing the property on land contract now, and in another year we should be able to get a good interest rate to buy it outright.

 

My question is:  If we sign a contract for deed and register it, would his creditors (ie credit cards companies) be able to put a lien on the property?  

 

Thank you,

 

If he has a mortgage his bank is unlikely to allow you to do this because if he defaults they do not want the entanglement of dealing with you in the foreclosure process.

 

Yes, as long as he is on the deed/mortgage his creditors can put a lien on the house.  

 

If he is in financial trouble this would be INCREDIBLY risky and a REALLY bad idea for you to do this.  The one who stands to lose the most is you.  If he doesn't make his mortgage payments and loses the home you lose too.  His mortgage company is the first lien holder and they have rights long before you in a land contract.  

Share this post


Link to post
Share on other sites

We are thinking about buying a property on a land contract from a friend who is in financial trouble (in Ohio).  Our credit is improving, but not the best.  We discussed purchasing the property on land contract now, and in another year we should be able to get a good interest rate to buy it outright.

 

My question is:  If we sign a contract for deed and register it, would his creditors (ie credit cards companies) be able to put a lien on the property?  

 

Thank you,

As long as they are registered deed holders of the property a lien can be put on it.

However, they can only put a lien for the amount that is owed them.

When the property is ever sold, the lien holder then gets their money.

 

A work around a lot of people are doing instead of a land contract is a Lease Option to Purchase.

Most usually last a year, and then you have to come up with financing. 

The Lease Option is like a rental agreement, "rent to own".

It is a good work around for people that have bank mortgages.

Most Lease Options have a small, nonrefundable, down payment, and make monthly payments, a certain amount of $ are applied to the principle amount each month....given that you come up with the financing as agreed upon in the Option.  Example 1 year etc.

At the end of the agreement, you either buy the property or not.

If you choose NOT to buy the property...down payment and monthly principle payments are not refunded.

Also, if you did a Lease Option, enough time could/would pass for any potential problems to surface.

As well as, you can see more in depth any issues the house/property might have as well, without the total commitment.

If you don't like the property, you can walk away from it, only loosing your down payment.

 

As far as payments go, your friend can have it set up where you make his mortgage payments on his behalf...

That way, you know that the payments are REALLY being made...  :)

So, for example:

If his payment to the bank is 500.00 per month,.. and your Lease amount is 600.00

Make the payment to the bank of $500 and make a payment to your friend for 100.00 each month.

 

One other thing I forgot to mention...

If you default on your part of the Lease Option, your friend can simply have you evicted instead of having to go through a

foreclosure. 

Hope this helps.  Good Luck !

 

Share this post


Link to post
Share on other sites

He does not have a mortgage, he owns it outright.  The financial trouble it his credit cards.  He cannot work and is trying to get disability.  He is not asking alot for the property and is not going to charge us interest.  

 

He was worried that if he sells to us and the credit card companies go after him they could put a lien on the property then we would be screwed.  Is that a possibility?

Share this post


Link to post
Share on other sites

He does not have a mortgage, he owns it outright.  The financial trouble it his credit cards.  He cannot work and is trying to get disability.  He is not asking alot for the property and is not going to charge us interest.  

 

He was worried that if he sells to us and the credit card companies go after him they could put a lien on the property then we would be screwed.  Is that a possibility?

They definitely could put a lien on the property, but they would have to take him to court first.

You guys could draw up a promissory note for whatever amount he wants for the property. Promissory Note definition

At the same time.... have your friend quit claim deed the property to you.

If he quit claim deeds the property to you...his name is off the title, and CC cannot put a lien.

Just make sure (in all fairness) that you secure the promissory note with something of value. i.e. the property, your car, etc.

 

The above way... the CC companies cannot put a lien on the property.

If they take your friend to court, and he looses, he will have to provide the information, that he get's "X amount of dollars" on that promissory note, treated more as an income, NOT an ASSET.  :-)

 

Then you should/could go to the bank, and get a home equity loan to pay him off.

Share this post


Link to post
Share on other sites

Thank you so much, your answers were VERY helpful!  We want every thing done correctly and not hurt either one of us.  Even though we have been friends for thirty years something like this could really mess up a friendship if not done correct.  You want to believe your friends will never hurt you, but sometimes they are the ones that do!

  • Like 1

Share this post


Link to post
Share on other sites

Thank you so much, your answers were VERY helpful!  We want every thing done correctly and not hurt either one of us.  Even though we have been friends for thirty years something like this could really mess up a friendship if not done correct.  You want to believe your friends will never hurt you, but sometimes they are the ones that do!

Your welcome ~

If it were me...that is how I would do it.

You can have a title company write up the particulars for you... most around here do it for about $125.00 

Make sure the quit claim deed gets filed with your register of deeds office, title company will do that in the deal as well.  :yahoo:  

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.