Land contract sales, which are called “agreements for deeds” in Florida, are seller-financed real estate deals.
While not uncommon, there are some pitfalls that can come with this kind of financing.
Why do people use seller-assisted financing for their home purchases?
There are several different reasons people turn to land contracts when they want to buy a home, but two situations tend to be most common:
- The seller doesn’t have enough equity in the property to sell it through traditional means without taking a loss or they aren’t willing to sell for the home’s appraised value. By contracting privately with the buyer, they don’t have to pay a realtor and worry about whether a bank will approve a mortgage at the price they are asking.
- The buyer doesn’t have enough money for a down payment or enough credit to get a mortgage. After several years of payments, the buyer can usually straighten out their credit or use the equity they’ve built in the home to convince a bank to give them a traditional mortgage.
These types of sales are also quicker, which can benefit both the buyer and the seller when they’re in a hurry.
What are some of the potential problems with seller-assisted financing?
Florida law is very clear on one thing: This kind of property sale is treated no differently than a mortgage when it comes to the law. Unfortunately, sellers often think that they can treat the buyer like a tenant or simply evict them if they don’t pay (instead of going through foreclosure).
Meanwhile, buyers often aren’t fully aware of their rights. They don’t know what paperwork has to be filed and how to protect themselves against unscrupulous sellers.
Neither buyer nor seller may realize the paperwork that must be filed with the state nor understand that a title search must be done to protect the buyer before the transaction is complete.
In any real estate transaction, it’s wise to be proactive about your rights. Legal guidance is a must.