What is the difference between Land Contracts and L/Os?

If you are the buyer, the difference is in the way the property is held. In a lease option, you will have equitable interest but not titleable interest because your name is not recorded on the title but you have a financial (equitable) interest in the property. In a land contract, you have both titleable interest and equitable interest in the property as your name is listed on the title. Because you are treated just as a normal buyer.

There is also a big difference (generally but there are exceptions)to the way one handles an eviction of a non paying buyer. In a lease option you evict them as a normal rental (most states), but in a land contact situation, you have to follow a foreclosure process once the equity in the home rises to a certain percentage amount. A very basic answer.

We can discuss this in detail, if you wish, over lunch next week. But I hope this helps for now.

not to disagree with Bill, who is very experienced....i have been told that with L/O's you do not have equitable interest, therefore you can evict. with a land contract, you do have that interest and have to foreclose. i have checked into them here and i would only buy on land contract, not sell, because if you have to foreclose, the tenant can live in the property rent-free for 9-24 months. i also just heard that it is taking an average of 500 days to foreclose now. so, it would be to my advantage to buy that way, but not to sell that way. hope that helps.

by the court is the percentage of equitable interest. Even if you do a lease option but they put down 20%, the court is not going to allow the tenants to lose that amount of money without the proper due process. In a lease option, the tenant has equitable interest in that property from the first day because they have been granted an option for that property. In today's market, the courts are going to look at any unscrupulous business practices....or example, some L/O investors set terms that are unable to be met in today's banking environment; such as asking for a 1 year period from tenants that have bad credit and/or having a selling price that cannot meet appraisal. In today's market you must be flexible to adjust with the reality of the market.

Karen,
thanks for asking this..

Bill and Linda,
thank you very much for your posts

Just to add my 2 cents...
With a Land Contract the tenant will have a % of equitable title to the property depending on how much he/she pays towards the purchase price. (i.e. if purchase price is $100K, and tenants puts $10K, down payment, he/she would have a 10% of equitable title.)
Also, with a Land Contract, tenant will make lump payments at periodic intervals and then have a balloon payment. Every time tenant makes a payment, his/her % of equitable title increases.

I guess the difference is that with a Land Contract the tenant is already buying the property when they put their money down; as with a Lease Option, they are just getting an 'option' to purchase in the future...

I'm trying to set up a Land Contract for my sister, so any additional info on this topic is greatly appreciated.... hmmm, I should call the Academy too

Val

That makes sense now.

Thanks ever so for the clarification!

at your lunch next week and listen to the further discussion...

We'll have to get together over here when you get back so that you can explain further to me as well...

Enjoy Kentucky! still in Kentucky, right??

Val

It's a DATE!!

I am in Athens, Georgia now.
Tomorrow I go to Charleston, South Carolina.
Then back to GA-Augusta.
Then back to KY
Then Charleston, West Virginia
To KY

Home to Cali on the 19th!

WHEW!!!