Hello - I have been reading over some posts here at the site and thought I would throw this one out for discussion. I am looking at purchasing a cottage (Michigan) on the river using a 18 month Land Contract. The sellers Realtor send me the LC to look over before I make an offer. I was a little concerned with the following paragraph therein and hoping for some input:

<quote>
FORFEITURE AND ACCELERATION:
Should Default be made by the purchaser in any of the provisions hereof, the seller may immediately thereafter declare this contract void and forfeited and the said buildings, improvements, and all payments made on this contract shall be forfeited to the seller as rental for the use of the premises and as stipulated damages for failure to perform this contract. Seller shall be entitled to immediate peaceable possession of said premises without notice and remove the purchaser and all persons claiming under him therefrom. Seller may without notice to the purchaser, declare all money remaining unpaid under this contract forthwith due and payable, notwithstanding that the period herein before limited for the payment of the said balance may not then have expired. Seller may thereafter enforce his rights under this contract in law or in equity, or may take summary proceedings to forfeit the interests of the purchaser or may enforce said contract in any other manner now or hereafter provided. In addition to any other remedy, seller, on default being made, may consider the purchaser as a tenant holding over without permission and remove purchaser, as provided by statute, prior to the institution of any proceeding to recover possession of the land.
</quote>

This seems very swift and severe to me, not sure if this is normal in land contracts or not, any input will be appreciated.

Thanks,
Tim

Something similar is always in mine. The issue is, this is not a true sale, since the deed is not transferred at the point you sign the contract, so no formal foreclosure can be done. So the contract has to convert to a rental in case you don't pay. That way you can be evicted. The problem I see is that not only do they change it to a rental, but want all the future moneys also payable without you getting the property.
I would want that clause taken out, so that only those money already paid, or those money for the time you were in possession to be paid.

For example if you were to paid 10,000 down and were to pay another 50,000 over 18 months, if you were late paying a payment on the 6th month, they could keep all the money you have paid, take the property back and still say you owe the balance.

They should be able to convert to rental, and keep all the money paid so far and charge you for the period you did not pay. But not collect all the money still owed.

I would have a new contract written as your counter offer, and not accept this offer at first

Thanks Fr_Chuck - I was actually hoping for some input from you on this after reading on here about LC's you seem like the resident expert.

I understand the part about not actually transferring the deed until the contract is paid in full, it seems like at 12:01 am the day a payment is due I would immediately and without notice have defaulted on the contract and lose all the monies thus paid. After your comment, I re-read and see that it seems as though not only I lose the property I will still owe the remaining balance. I am thinking maybe I should contact a real estate attorney, because my knowledge in this field is very limited. This is not an extremely expensive property (25000) but I will be putting 20% down and building equity quickly due to the short contract length, there is no balloon payment, it pays out.

Can you recommend any links for good LC's or should I just go to Office Depot etc. and buy one there.

Thanks again for your input.

Best,
Tim

I wondered how taxes work if your under a land contract. Does the home owner claim the mortgage interest on tax return or does the person buying on the land contract?