I'm pretty fascinated with the legal profession in that they really do have their areas of expertise just like many other professions. But the one thing that comes up time and time again is the world of "contract law" and how it affects the real estate industry. In fact, it is probably the most negotiated aspect of real estate including purchase prices. I say this because there are many more "terms" of a contract than there is purchase price. Let's face it, if a contract price is negotiated more than three or four times it's pretty rare. You start low, I respond high, you come up a little, I come down a little and we usually end up within 20% of the middle. Yes, this market has changed things a little, but fundamentally that's the negotiation on price. Terms? Not even close. Look at any real estate contract and there are paragraphs upon paragraphs upon the terms of the deal: and that's in addition to the terms that will be negotiated.
What does this have to do with the title? Plenty, especially if you're a licensed real estate agent or you're working with a licensed real estate agent. You see, it's fine for someone to negotiate on their own behalf. However, almost no one does it. And hiring a real estate agent to help you buy, sell, lease or land contract a property for you is a game changer. Only people who are licensed to practice law in Ohio are allowed to practice law in Ohio. I know it sounds redundant, but it isn't. Filling in the real estate contract is not practicing law, it's filling in a form. There's more to it than that, but let's leave it as is for now. But defining a lease or a lease/purchase or let alone a land contract is not filling in a form but rather creating a contract. And doing it on another's behalf is not allowed.
I'm going to work backward a little bit. A very loose definition of a Land Contract is a "Contractual arrangement used in some states under which a buyer purchases real estate from a seller over a period of time, usually by making periodic installment payments. Title is not conveyed to the buyer until the final payment is made. Also called an article of agreement". Seems pretty simple, right? Wrong. Unless you own the real estate outright (no mortgage whatsoever, even one that's paid off), it's almost always illegal to do a land contract. Why you ask? Because all mortgages have a clause in them that says as soon as you sell your property you must pay off the mortgage. In a land contract, the deed doesn't not transfer but that does not mean you haven't sold the property. Splitting hairs? Your mortgage company doesn't think so. If you have questions regarding a land contract, contact your attorney. I'm not an attorney and I'm not giving any legal advice at all (disclaimer put in here on purpose).
I'm jumping to the front here and talking about a lease. You rent the property for a stated period of time for a stated amount. That's the end of that conversation.
A lease/purchase or lease to purchase is different. Different than a lease and nothing like a land contract. A lease/purchase agreement is when you agree to lease your property for a fixed period of time at a fixed amount and you have a contract for that same person to close on your home at the end of the lease period. In a lease/purchase agreement you have not sold the home; you are in contract to sell the home, but you haven't sold the home. That's a big difference to the bank (although you may have other issues and I'm not one to address those and therefore I'm not recommending you do anything before you speak with your attorney). However, if you've hired a real estate professional to help you market your home they can write the contract for the sale part but not for the lease part. And that's important for you because you want to make sure you're protected and you really want your agent protected as well. If there is a problem in the future, you want to be able to make sure you've done everything properly from a legal standpoint. And if you're the buyer you really do want the same thing. The last thing you want is a knock on your door and someone standing there stating you have 24 hours to move out and by the way, the down payment you gave the owner? Gone.
So to sum up: I'm not an attorney and I'm not giving any legal advice. Hire an attorney (you cheapskate) to work for you. What am I doing here? Informing, nothing but informing. I did this because it's the way a lot of real estate is being handled right now and will continue to do so in the future. There's no reason to be penny-wise and pound-foolish. Hire an expert to help you. It's well worth it not just in the long run, but in the short run as well.
Questions for me? Email me at jkahn@bdpsolutions.com.
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