It is unfortunate, but one of the most common phrases we hear from sellers is “I don’t want to do anything to the land, just sell it as is.” At that point we begin the education process, but sometimes to no avail. Some sellers are just determined to leave significant amounts of money on the table due to the lack of “curb appeal” displayed by their property.
However, after the buyer makes his sixth payment, I give him title to the property, that is I make and record a Warranty Deed to him, and hold a Promissory Note and Deed of Trust in return as security. Finally, as boiler-plate, I have the buyer sign a Quit-claim Deed back to me which is annotated to only be recorded in the event of a default. This, in one stroke lowers my foreclosure costs from around $1,500 to hire an attorney to perform a trustee’s sale, down to about $27 to record the Quit-claim Deed. Since I create all the contracts and deeds myself from standard forms, I save immensely on attorney’s fees. Using this technique, I am prepared both for the long-term sale as well as, should it be necessary, a fast and easy foreclosure.
The first thing you must do when you have signed a contract to buy a property, especially where there are professionals involved in representing the interests of either party, is to lodge a caveat to protect your interest in the property until settlement. A caveat will stop the vendor from selling to someone else or encumbering the property without notice to you.
Provide as much detail as you can. Land buyers want the facts, and they wanted them yesterday. When you’re listing your property, be sure to include the zoning, plus details on whether the buyer will be able to change the way the property is zoned. You also want to include details on taxes paid on the land and other typical expenses. If you can, include the tax-roll printout from your local land registry or county assessor and include the legal description of the land in the listing. You can also provide that detail when people come to look at the land.
Depending on the state in which the property subject to the land contract sale exists, the buyer will want to file additional forms to gain the benefits of being the property owner, even though technically, the buyer does not have a true legal title to the property until full payment of the purchase price is made. Such forms may be a property transfer affidavit, which you may be required to file with the city assessor’s office for tax purposes, or a principle residence exemption, which gives the buyer a tax break for using the property as the buyer’s principle residence.
A closing statement should be prepared to show an accounting of the debits and credits to each the buyer and to the seller as part of the land contract transaction. An attorney or a title agency can prepare a closing statement for the parties. The closing statement may also contain an amortization schedule showing the projected payments to be made from buyer to seller to fulfill the financial obligation of the land contract.
Agents, of course, will charge as much as 2.5% plus GST as commission on the sale of the property which, depending on the price, can be a significant sum. However, if you have done your homework, whether you are the buyer or seller (we call them “purchaser” or “vendor”), it is possible to cut a fair deal, and to have all the documents prepared properly and legally, without the cost involved in having a real estate agent.
When you’re selling a home, you want to give buyers all the details about it, such as a list of all projects you’ve had completed and a list of all updates and maintenance work performed within the last decade. You also want to show off the most desirable areas of the home, such as the kitchen or recently renovated bathrooms. Buyers are looking for details on the community, such as nearby schools, the friendliness of the neighborhood and property tax information.
Just like you'd stage a home, you want the vacant land to show at its best. A lot overgrown with weeds is going to look less desirable in the eyes of a potential buyer than a lot that's apparently cared-for. Professionally trim trees, mow grass, remove weeds and perhaps plant wildflowers to show the property at its best. Visit the property weekly – or hire someone to do so – to remove windblown trash, beer cans, fire rings or anything else that might detract from its curb appeal.
You should work out a budget for advertising, because it can get pretty pricey. Although it’s not mandatory, it’s a good idea to get a selection of photos of your house showing it at its best, and using these in your advertising. Make sure any advertisements include accurate details about how and when you can be contacted. If you don't want calls from agents offering their services you can include the words “no agents please” in your ads.
You may also want a lawyer to produce and review contract documents; some states actually require you to hire one. Although you can find much of the paperwork online, Schorr says, “you need to tailor it to your deal — and the way you fill it out is just as important as what the boilerplate language says.” You’ll probably pay $1,000 to $3,000, depending on the cost of living in your area, but you’ll get an experienced pro who’s in your corner and can make sure the deal gets done right.
An attorney’s office or a title company can prepare closing documents for a land contract sale, but only the parties themselves or an attorney can prepare the actual land contract document and land contract memorandum. It is important to keep copies of all documents involved in closing on a land contract to verify required filings are performed and to protect each party’s interests in the sale.
Make sure your land is in marketable condition. Ensure your land is aesthetically pleasing by doing some cleanup. Mowing, weeding and removing garbage from the land may be necessary. This will provide the land with more “curb appeal” and give the potential buyers a better first impression. Providing corner markers indicating the property boundaries are also helpful for a potential buyer.
When you’re selling land, you might have a potential buyer base in your backyard. It’d be peculiar for one homeowner to buy their neighbor’s home, but it’s not so weird for a neighboring farm or another nearby landowner to consider buying the property that’s just next door, so to speak. It could be your neighbors have been looking to expand their farm for some time now. You selling your land provides a mutually beneficial opportunity.
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Dino Di Rosa, the Founder and Principal of Di Rosa Lawyers, has over 25 years’ experience as a lawyer. Based in the heart of Adelaide’s legal precinct, he is the trusted adviser many South Australian business and property owners turn to whenever they need help in the areas of law that matter most: family law, wills and estate planning, deceased estates and property law and conveyancing.
The land contract should also state how the payments are to be made, including the due date, any grace periods for late payments, late payment fees, and where the buyer should deliver each payment. Typically, the land contract buyer will be treated just like the property owner and thus will be responsible for the taxes on the property, the insurance, and any utility bills including water and sewer which are typically billed directly to the property.