One way to finance a home in Ohio is through a land contract purchase agreement. For a buyer with less-than-perfect credit or a low down-payment, the land contract option has its benefits. For the seller who needs money right away, the land contract agreement has its drawbacks. For both parties, the state of Ohio outlined the requirements for selling real estate using a land contract agreement.
The property sold using a land contract must include a house and the land it sits upon or a parcel of vacant land. The land contract must list the land, using the street address and or the legal description of the property listed with the local auditor's office. The property lines are clearly stated in the land contract agreement so both parties know exactly what is being sold. The selling price, interest charged, length of the contract and names of the parties involved in the real estate transaction must be included in the land contract. Other items included in the contract are the payment schedule, late fees and the date of the contract.
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The seller must represent the property in a truthful manner. The seller is obligated to disclose any liens on the property or other encumbrances, such as from the tax office or other institutions. The seller must disclose known problems with the real estate, such as flooding, broken appliances or problems with the plumbing or electrical service. The seller must register the land contract with the clerk of courts within 20 days of both parties' signing the sales agreement. The seller cannot obtain a mortgage on the property that is greater than the selling price, without first notifying the buyer. Ohio law also states that the seller must provide the buyer with a statement of interest paid and the balance owed at least once per year.
The buyer has the right to inspect the property prior to purchase to determine what needs to be repaired and what is not in good working order. The buyer may be asked in the purchase agreement to pay the taxes and insurance on the property. Failure to pay, when in the contract, could result in the seller's claiming the buyer defaulted on the agreement. The buyer must also maintain the property in good working order for the duration of the land contract because, if the buyer defaults, the seller has the recourse of suing for damages.
Pros and Cons
A land contract allows the seller to market a property that may not qualify for conventional financing. The seller is not responsible for repairs to the property and may ask that the buyer pay the taxes and insurance. However, the buyer may default and leave the property badly damaged, costing the seller money for repairs.
The buyer who does not qualify for conventional financing may ask for a land contract to purchase real estate. The land contract may allow the buyer to generate a needed down-payment over the term of the contract, when the time comes to qualify for a traditional loan. If the buyer does not qualify for traditional financing at the end of the land contract, he may lose all money invested in the property, unless both parties can negotiate a deal.