Seller Financing

Land Contracts have come back in vogue as lending standards have tightened. Land Contracts are a form of Seller financing. In a summary, the buyer pays the Seller in installments over a period of time until the total purchase price is paid in full.
 
In Wisconsin, a land contract buyer is deemed to have “equitable title” upon signing the land contract.
 
This means that, for all intents and purposes, the Buyer owns the property and the seller owns a right to get paid.
 
This is why the seller should think like a bank by asking for credit reports, payment history, income, assets and liabilities and require a non-refundable down payment.
 
Why would a seller offer seller financing as an option?
 
The short answer is: the seller needs the money, needs the sale, and needs it now. Most land contracts are structured so that the Buyer will make payment for a number of months and then make a balloon payment at the end.  A typical land contract might have the Buyer making 24 monthly payments of $1500 (principal / interest / real estate tax and insurance) and then paying the balance in full at the end of the second year.  If the buyer cannot make the final payment through refinancing the seller gets the property back and the buyer loses their down payment.
 
Why would a buyer purchase a property through a land contract instead of a traditional mortgage?
 
The buyer cannot meet the lender requirements because they have started a new job, are self-employed, went through a recent bankruptcy, or has insufficient dollars for a down payment
 
Certainly, a seller should have confidence the seller will be able to get financing at the end of the land contract. Keep in mind a buyer with poor credit is more likely to incur judgments or tax liens that could attach as liens on the property. Once this happens, the seller’s only way to remove those liens (in Wisconsin) is to have them paid or to foreclose on the property.
 
Finally, keep in mind only a licensed Broker or Attorney can draft a land contract on behalf of another in Wisconsin.