Published on Monday, November 16, 2015 by Land Century
One of the first things youll need is a purchase agreement. A purchase agreement is a legal document that the buyer signs when making an offer on the property. This simply indicates that the buyer intends on going through with the purchase, provided all terms of the contract are met.
If you plan on offering seller financing, you will need to indicate that the buyers offer is for a land contract. In this case, youll need to include the purchase price, length of the payment term, down payment and any other terms of the land sale in the agreement.
You may be required to disclose certain defects of the property. Real estate disclosures will vary by state, so you may consider working with a real estate attorney to ensure that you have made all of the proper disclosures.
The seller will want a copy of this document along with the signed form.
Contract for Sale
If the buyer has secured financing or is planning on paying with cash, a contract for sale will be necessary. This contract will specify the terms of the sale and may also specify other documents required before transferring the deed. This may include the financial documents that are necessary to secure financing. The contract may also indicate that title insurance will be provided. In this case, the title company may be involved in the transaction.
Land Contract (Seller Financing)
If youll be offering financing, you'll need to create a land contract. This is a separate legal agreement or contract that lists all of the terms and conditions that you and the buyer agree on.
In the very least, your land contract should include the address of the property and a full legal description of the land. It should also include the down payment amount, purchase price, the number of payments that will be made, the monthly payment amounts, and any balloon payments that may be required. You may also consider creating and attaching an amortization schedule.
Additionally, the land contract should indicate how many payments will be made, their due dates, grace periods (if applicable), fees for late payments, and how the buyer should deliver each payment. Under a land contract, buyers are usually treated just like a property owner, and will be responsible for paying property taxes, insurance, and any utility bills associated with the land use.
Memorandum of Land Contract (Seller Financing)
If you have created a land contract, youll also need a memorandum of land contract. This is, essentially, an abbreviated legal document that references the main contract created. This simply serves as a public notice that the buyer is interested in the property without you and the buyer having to disclose and record the entire land contract. Because the deed of the property will not be filed until youve received full payment on the purchase price indicated in the contract, this memorandum will be filed with the county and the city to serve as a record that the buyer is interested in the property.
Keeping a description of the property and its address should be listed on the memorandum as well as the names of both you and the buyer, and the date of the land contract. Youll need to sign the document and have it notarized.
A deed should be required in order to transfer the legal title of the property to the buyer. If the buyer already has financing or is paying in cash, youll want to have the drafted deed with you at closing. The deed will need to be transferred to the buyer, and filed with the appropriate government agency.
If youre providing seller financing, youll still need to draft a deed, but this deed will be held in escrow until the final payment is made. Once that payment is made, the deed will be filed with its respective government agency, typically the county clerk. You can have an attorney, title agency, or a financial institution hold the median in escrow for you until the buyer makes the final payment.
If youre financing the deal, a closing statement will also be required that details the credits and debits to each the seller and the buyer. A title agency or an attorney can prepare the statement for you, and it may include an amortization schedule that shows projected payments to be made by the buyer.
Other Necessary Documents
Other documents may also be required, such as a copy of your property insurance. Buyer may wish to see a copy of your policy, or the name of the agent and the coverage amounts you have. The seller may also ask you to provide a topographical map of the property along with its boundaries.
The Importance of Hiring a Professional
Although the process of selling land is less complex than selling a piece of property with a home, this is still a process that requires the help of a professional. Real estate laws vary from state to state, so its important to work with an experienced real estate attorney when selling your land. The help of a professional becomes even more important if youre creating a land contract.
Whether youre selling your land yourself or with the help of a real estate professional, its important to ensure that you have all the necessary documents to complete the transaction. Its highly recommended that you consult with an attorney to ensure that your contract includes all of the necessary information and to ensure that you arent missing any important documentation. If you plan on selling the land yourself, be sure to do your research to avoid complications during the sale process.