I happened to me before. I advise customers, then they call their tax man and he kills the deal. While unfortunate, you have to bury the deal and move. Sometimes I dream of calling the tax man and tell him everything I think about him but I digress…
My clients are trying to sell their condo for over a year. It is difficult. The property is in turmoil, and this is pretty much the story where you can offer to pay people to buy a condo and they still wouldn’t. Not that there are no sales at all, but simply very few Buyers.
I received the email from an agent. Asking about owner financing. Forwarded to the Sellers, they ask questions, I explain how it works, it all seems fine, and then they call and say it is a bad deal. This is what their tax man told them. I guess his main point was that in case of default, the Buyer would have to take foreclosure route and it costs money. So, there is no benefit to the Seller.
He said a good deal would be Land Contract (Contract for Deed). What is Land Contract? It is when the Seller still owns the property, and there are set regular payments and when the Buyers pay it off, then the Seller transfers the property to the Buyer.
Hmm, if that would be a good choice, why I do not see Land Contracts used. Actually, never did a Land Contract in my nearly 20 years in Florida Real Estate. I called my Title Company, and they said “no”. They said they did not remember why, but there is something that makes them unpopular.
Land Contracts in Florida
A little research shows why they are not popular in Florida:
- The State of Florida views a land contract as a transfer of interest and therefore collects from the seller a documentary transfer tax on the property as if the property is sold, despite the fact the seller does not convey a deed.
- State of Florida views a land contract as borrowed money and therefore collects an intangible tax and documentary stamps from the buyer as if there was a note and mortgage involved.
- The State of Florida views a buyer’s interest in a land contract as an equitable interest. In order to protect the buyer, the land sales contract must be recorded. Regardless of whether or not actual title is conveyed in the event of a default a seller must go through a complete and total foreclosure process to obtain a clear title.
- Since title remains in the name of the Seller, in the event a buyer has a party or guests on the property and there is an incident, the Seller is the one that remains liable and is open to potential lawsuits.
Wow, I did not even think of it. So, you own the property but still would have to run foreclosure. And #4 sounds scary to me, too. Anything happens, the Owner could be sued. (Attorney Ronald S. Webster) ————————————————————————————
And all this happens because the Sellers and their tax man do not live in Florida, and laws and contracts, including Land Contracts are very different in Florida, so, probably, the advice would be great for that other state, but not for Florida.
We need to remember that things are different in different states, and be careful when giving advice.
Image by NobMouse via Flickr.com/creativecommons