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  1. #1
    Join Date
    Oct 2019
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    NE Ohio
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    Question Looking for Best Option for Sale of Vacant Land

    My question involves real estate located in the State of: Ohio

    Wife and I own vacant land that we wish to sell to a young couple. They do not have enough to pay in full so we exploring our options. We have a title company and their staff attorney ready to prepare documents whichever way we go. We are curious about any pitfalls to any vehicle we select.

    LAND CONTRACT: We started looking here but find a dwelling is required for a Land Installment Contract. Ohio Revised Code 5313.01(B). "(B) "Property" means real property located in this state improved by virtue of a dwelling having been erected on the real property." Can we write an installment sales contract and just not call it a "Land Installment Contract"?

    OPTION CONTRACT: Next we look at an option contract, where we would use the same payment terms as the land contract agreement. Call the down payment a payment for the option, and schedule 8 yearly payments to renew the option until they pay it off.

    DEED TO THEM AND CARRY A NOTE: Pretty self explanatory, conventional sale with us financing them over 8 years. Seems the simplest method.

    TENANCY IN COMMON: We add them to a new deed with their proportional share. Could regularly update deed as their share increases. Worried about the what if they get a 1/2 interest and stop paying, we would be able to market it, but would our 1/2 interest be sellable?

    SOMETHING ELSE?

    Factors to consider: We originally bought this land so that this couple could eventually buy it. We are holding it for them and selling for what it costs us, we're not profiting on it in any way. No interest or fees UNLESS they default (really don't expect that). It is a non buildable lakefront lot that has an income generating boat dock on it. Last two year we are letting THEM keep the dock income to help create a down payment. They have been tending to the dock and the land for the last 12 years and were caught off guard with a sudden "health issues" sale so we stepped in to help them. They will be paying all associated costs.

    Because we are not profiting we are looking for the safest vehicle for us and the least costly means for them.

  2. #2
    Join Date
    Oct 2006
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    15,932

    Default Re: Looking for Best Option for Sale of Vacant Land

    Quote Quoting buzzards27
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    My question involves real estate located in the State of: Ohio

    Wife and I own vacant land that we wish to sell to a young couple. They do not have enough to pay in full so we exploring our options. We have a title company and their staff attorney ready to prepare documents whichever way we go. We are curious about any pitfalls to any vehicle we select.

    LAND CONTRACT: We started looking here but find a dwelling is required for a Land Installment Contract. Ohio Revised Code 5313.01(B). "(B) "Property" means real property located in this state improved by virtue of a dwelling having been erected on the real property." Can we write an installment sales contract and just not call it a "Land Installment Contract"?

    OPTION CONTRACT: Next we look at an option contract, where we would use the same payment terms as the land contract agreement. Call the down payment a payment for the option, and schedule 8 yearly payments to renew the option until they pay it off.

    DEED TO THEM AND CARRY A NOTE: Pretty self explanatory, conventional sale with us financing them over 8 years. Seems the simplest method.


    TENANCY IN COMMON: We add them to a new deed with their proportional share. Could regularly update deed as their share increases. Worried about the what if they get a 1/2 interest and stop paying, we would be able to market it, but would our 1/2 interest be sellable?

    SOMETHING ELSE?

    Factors to consider: We originally bought this land so that this couple could eventually buy it. We are holding it for them and selling for what it costs us, we're not profiting on it in any way. No interest or fees UNLESS they default (really don't expect that). It is a non buildable lakefront lot that has an income generating boat dock on it. Last two year we are letting THEM keep the dock income to help create a down payment. They have been tending to the dock and the land for the last 12 years and were caught off guard with a sudden "health issues" sale so we stepped in to help them. They will be paying all associated costs.

    Because we are not profiting we are looking for the safest vehicle for us and the least costly means for them.
    If you truly do not expect a default from them then the most simple means to do it would likely be the bolded. The only potential problem with it is if they default, you will have to actually foreclose.

  3. #3
    Join Date
    Mar 2013
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    17,483

    Default Re: Looking for Best Option for Sale of Vacant Land

    Quote Quoting buzzards27
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    LAND CONTRACT: We started looking here but find a dwelling is required for a Land Installment Contract. Ohio Revised Code 5313.01(B). "(B) "Property" means real property located in this state improved by virtue of a dwelling having been erected on the real property." Can we write an installment sales contract and just not call it a "Land Installment Contract"?

    No. If it walks like a duck and quacks like a duck, it's a duck. If you hear hoofbeats think horses, not zebras.

    OPTION CONTRACT: Next we look at an option contract, where we would use the same payment terms as the land contract agreement. Call the down payment a payment for the option, and schedule 8 yearly payments to renew the option until they pay it off.

    I like that better than all the others as there is no risk to you if they end up not paying.

    DEED TO THEM AND CARRY A NOTE: Pretty self explanatory, conventional sale with us financing them over 8 years. Seems the simplest method.

    And the most dangerous. If they can't afford to buy it outright and they can't qualify for a loan, there's a good reason why banks won't lend to them and you're not smarter than any bank that won't lend them money.

    TENANCY IN COMMON: We add them to a new deed with their proportional share. Could regularly update deed as their share increases. Worried about the what if they get a 1/2 interest and stop paying, we would be able to market it, but would our 1/2 interest be sellable?

    Again, dangerous, because you give them ownership without them paying for it. Foreclosure is costly and time consuming.

    Because we are not profiting we are looking for the safest vehicle for us and the least costly means for them.
    The safest for you, I think, is the option contract. If they can't pay, they are tenants and you evict them.

    Make sure you consult a lawyer about writing up anything so it gets done right.

  4. #4
    Join Date
    Oct 2019
    Location
    NE Ohio
    Posts
    18

    Default Re: Looking for Best Option for Sale of Vacant Land

    Quote Quoting adjusterjack
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    The safest for you, I think, is the option contract. If they can't pay, they are tenants and you evict them.

    Make sure you consult a lawyer about writing up anything so it gets done right.
    It is highly unlikely they'd default under any option. They really want this lot and have devoted a lot of effort and material into it before I got it and since. It would take something like a death for them to back out.

    ADDED: They are very credit worthy, most banks aren't making loans for vacant land, much less an unbuildable lot. They have had several people ask to be partners and I've had a 100k offer from another party.

    We really need the option that will keep us friends in the end. They are putting 22k out of 62k up front and paying 5k a year until paid off, no interest or fees, UNLESS THEY DEFAULTED. I'm thinking they wouldn't default (too much up front to loose and no interest if they pay on time).

    Yes, the title company attorney will formalize our terms into a contract.

  5. #5
    Join Date
    Mar 2013
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    Default Re: Looking for Best Option for Sale of Vacant Land

    Quote Quoting buzzards27
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    I'm thinking they wouldn't default (too much up front to loose and no interest if they pay on time).
    I had to laugh when I read that.

    Years ago I sold a home for 72,000. The buyer assumed my (then assumable) first mortgage of 40,000. He put up 19,000 cash and I carried back a loan of 13,000 figuring with that much skin in the game there was little chance of default. 6 months later the guy went belly up financially and abandoned the house. Cost me about 2500 for the foreclosure.

    You have no control over their financial lives over the next 5 years. Anything can happen. Illness. Job loss. Once they can't pay the friendship goes out the window.

    You do what you are comfortable with and hope for the best.

  6. #6
    Join Date
    Oct 2019
    Location
    NE Ohio
    Posts
    18

    Default Re: Looking for Best Option for Sale of Vacant Land

    Quote Quoting adjusterjack
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    I had to laugh when I read that.

    Years ago I sold a home for 72,000. The buyer assumed my (then assumable) first mortgage of 40,000. He put up 19,000 cash and I carried back a loan of 13,000 figuring with that much skin in the game there was little chance of default. 6 months later the guy went belly up financially and abandoned the house. Cost me about 2500 for the foreclosure.

    yep, once sold a home land contract without know anything, they stopped paying my mortgage, trashed the place and left me to deal with the foreclosure

    You have no control over their financial lives over the next 5 years. Anything can happen. Illness. Job loss. Once they can't pay the friendship goes out the window.

    Sure, I got that. In my own comments I point to why we bought it, because of a very real sudden health issue sale. Never know what's going to happen. They have two good jobs, get 50% of annual payments from dock fees, own two houses and a 20k fifth wheel so they aren't hurting TODAY

    You do what you are comfortable with and hope for the best.
    I'm trying to determine which option would be safest for us and easiest to put us back to a clean title if a walk away default did happen. As I mentioned this lot is highly sought after, have a 100k offer, the guy that lost it to me (see my other threads) and several others that have expressed interest. If they walked I'd sell it and return what the youngsters put in it.

    On the other side, we need to get something in place to protect them, we're either side of 70 and they're either side of 40. I don't want my kid (living 1200 miles away) having to deal with it if it drags out past our lives.

    A new question, if we used the "option to purchase" option could we run the payments through escrow and deposit the deed with them? Is an 8 year escrow even possible?

  7. #7
    Join Date
    Mar 2013
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    Default Re: Looking for Best Option for Sale of Vacant Land

    Quote Quoting buzzards27
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    A new question, if we used the "option to purchase" option could we run the payments through escrow and deposit the deed with them? Is an 8 year escrow even possible?
    I don't see why not. Call up local escrow companies and ask if they can provide that kind of service and how much it would cost you.

  8. #8

    Default Re: Looking for Best Option for Sale of Vacant Land

    Quote Quoting buzzards27
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    It is highly unlikely they'd default under any option. They really want this lot and have devoted a lot of effort and material into it before I got it and since. It would take something like a death for them to back out.

    ADDED: They are very credit worthy, most banks aren't making loans for vacant land, much less an unbuildable lot. They have had several people ask to be partners and I've had a 100k offer from another party.
    Money and friends are a hard mix--best to do what you need to protect yourself so that you aren't burned if something goes wrong. Most people don't want or intend to default, but sometimes life happens.

    If this is an income producing dock and they are making money off it (as you mentioned letting them keep the money to put towards the down payment--less whatever taxes the land incurs, I assume), then they are running a business. Have they considered getting a small business loan? They've got history with the property to share with the bank, so they should be able to show how the rentals are a profitable business and worthy of investment.

  9. #9
    Join Date
    Oct 2019
    Location
    NE Ohio
    Posts
    18

    Default Re: Looking for Best Option for Sale of Vacant Land

    They're willing to do an option (23k up front) and pay the rest before they see a deed. He actually didn't want us giving them and deed and holding a note, he's dealt with a headache like that after it went bad. I guess we'll have the option contract filed with the recorder and just issue a deed upon payment.

    Thanks everyone.

  10. #10
    Join Date
    Dec 2019
    Location
    US
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    6

    Default Re: Looking for Best Option for Sale of Vacant Land

    Quote Quoting buzzards27
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    They're willing to do an option (23k up front) and pay the rest before they see a deed. He actually didn't want us giving them and deed and holding a note, he's dealt with a headache like that after it went bad. I guess we'll have the option contract filed with the recorder and just issue a deed upon payment.

    Thanks everyone.
    We are also planning to buy a land here on our place thanks for sharing this kind of topic.

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