There are some people who do not qualify for normal mortgages. These folks make use of land contracts for purchases that are made with investments in mind. These land contracts can be used for purchasing Dallas residential properties and commercial properties and are governed by various kinds of legislation based on the municipality where the land contract is entered into. There are various names for land contracts. These can be called a deed of trust, contract for deed, installment land contract or even privately held mortgage.
In general land contracts are quite flexible as far as terms and conditions go. In most cases, you have to make a down payment and then keep making regular monthly installments. You may also have the option of making a balloon or lump sum payment to the end to clear the loan. But it is necessary to look at the downside too. If you have entered into a land contract and fail to make payments, the default can cost you not only the property bought, but all the equity that you have already sunk into the property. In many cases land contracts are also known as installment sales agreements. When the buyer pays rent to the seller, a part of the money goes towards the interest in the property. Once all the payments are made, the deed or ownership of the property is duly transferred to the buyer.
In most cases, land contracts are entered into for a period of 3-5 years. Borrowers pay an amount on a monthly basis which is a monthly installment and a balloon or lump sum payment at the end of the term to clear the balance. There are Land Contracts with the special Power of Sale clause. This ensures that these contacts can be foreclosed like a regular deed of trust. This is done by the Trustee of the Land Contract, where the clause is quite important from the perspective of safeguard by owning title insurance. Without this clause, land contracts do not have much practical value.
In the recent past, land contracts have had bad publicity. This is primarily due to the fact that some sellers sold houses on land contracts that were over mortgaged to a large extent. Buyers were still paying their dues, whereas sellers defaulted on the underlying mortgages. In some cases, the reverse also happened. Buyers stopped making payments. This compelled sellers to want buyers out of the property and also forfeit all payments made till that time, which was not acceptable to the buyers. All of this means that you should read the terms and conditions of land contracts very carefully especially if it’s a Dallas investment property.
Foreclosure of land contract is quite a complicated and long drawn out procedures. This is a means of regaining possession of the property without allowing any forfeiture. In forfeiture the buyer may not lose the property by means of paying liens, and back property taxes. In foreclose option the buyer has to bear the cost of the total balance amount under the land contract.