Texas Land Contracts can be really tricky these days. Texas passed a new legal requirement on Land Contracts that makes the disclosure and reporting requirements pretty tough to follow. For example, the date that the disclosure (interest and r/e taxes paid) must be sent is no later than January 1 of the following year. Well.... that's a holiday! Evidently, that doesn't matter! This is one way those in the big house are trying to dissuade Land Contracts. Keep this in mind if you have any Land Contracts.
If you have any Land Contracts, there are basically two ways you can "cash out of them". The first is to simply sell the entire Land Contract. As long as you are properly handling the disclosure reports, this is a very simple process. You simply assign your rights to a Land Contract Buyer. All Land Contracts (and Seller Financed Notes) are purchased at a discount so be careful to work with a reputable buyer or broker. The amount of the discount depends upon the type of property, the number of payments made, the interest rate, the equity in the property, and the credit of the payors.
The other way to "cash out" is to convert the Land Contract to a mortgage and sell the mortgage at closing. This actually puts the property in deed to the buyers at closing. This is considered a simultaneous closing (for the mortgage purchase) however, because there have been no payments made yet on that mortgage. The Land Contract payments do not count.
Generally, there are more real buyers for seller financed mortgages than there are for Land Contracts. However, a cash-flow buyer will pay less for a new mortgage (simultaneous closing described above) than they will for a seasoned cash-flow (land contract sale). Because of these factors, it is important to deal with someone who purchases BOTH (Land Contracts AND newly created Seller Financed Mortgages). They can help you determine the best route to go.
A triple simultaneous closing is also an alternative for those who are trying to flip a property. 1) Purchase from the original seller; 2) Sell to a new buyer by creating a seller financed mortgage; and 3) Sell that seller financed mortgage at the closing table. Three closings, all on the same day.
Hope this gets those creative juices flowing!!
Warmly,
Michele Robbins, CPA
Note Funding Resources, LLC
http://www.notefunding.comOffice (410) 827-5788
Fax (410) 827-8294
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