How To Profit In Land Contracts - Part 4 12. SUBSTITUTION OF TRUSTEES
Vendor, or any successor in ownership of any indebtedness secured hereby, may from time to time, by written instrument, substitute a successor or successors to any trustee named herein or acting hereunder, which instrument, executed by the Vendor and duly acknowledged and recorded in the office of the recorder of the county or counties where said property is situated, shall be conclusive proof of property substitution of such successor trustee or trustees, who shall, without conveyance from the predecessor trustee, succeed to all its title, estate, rights, powers and duties. Said instrument must contain the name of the original Vendee, Trustee and Vendor, hereunder, the book and page of Document Number where this Security Land Contract is recorded and the name and address of the new trustee.
13. BINDING EFFECT
This agreement binds the parties hereto, their heirs, legatees, devisees, administrators, executors, successors and assigns, and may be executed in duplicate.
14. CONSTRUCTION
All words used in this agreement, including the words "Vendor" and "Vendee" shall be construed to include the plural as well as the singular number and words used herewith in the present tense shall include the future as well as the present, and words used in the masculine gender shall include the feminine and neuter gender.
IN WITNESS WHEREOF, the parties have hereunto executed as of the date first above written.
15. ATTORNEY’S FEES
If any party to this Agreement or any assignee of any party hereunder shall bring an action in any court of competent jurisdiction to enforce any covenant of this Agreement, including any action to collect any payment required hereunder, or to quiet his title against the other party to this Agreement, it is hereby mutually agreed that the prevailing party shall be entitled to reasonable attorney’s fees and all costs and expenses in connection with said action, which sums shall be included in any judgment or decree entered in such action in favor of the prevailing party.
________________________________________ ________________________________________
________________________________________ _________________________________________
Vendor(s) Vendee(s)
NOTE: THE PARTIES HERETO ARE CAUTIONED THAT BY COMPLETING AND EXECUTING THIS AGREEMENT, LEGAL RIGHTS AND DUTIES ARE CREATED. THEY ARE ADVISED TO SEEK INDEPENDENT LEGAL COUNSEL AS TO ALL MATTERS CONTAINED IN THIS DOCUMENT.
(Notary)
TWO-PARTY LAND CONTRACT
The following is a two-party Land Contract. As you read through the document you will see that it is very similar to the three-party contract. The primary difference is the absence of a trustee, the third party, and the clauses that govern the actions of the trustee.
The two-party contract is simply an agreement between the seller of the real property and the buyer of the property. The scope of the agreement is spelled out in detail, as should be the case with all good contracts.
To avoid any misunderstanding the seller should lead the buyer through every line of the contract to be sure there is a meeting of the minds. Resolve any objections before the contract is signed.
The following document is a sample. Seek the guidance of an experienced real estate attorney in drafting a Land Contract that will be binding and legal in your state.
LAND CONTRACT
THIS CONTRACT, made this ________________ day of ______________________, 20____, between ___________________________________________________________________________________
hereinafter referred to as the Seller, whose address is ________________________________________
________________________________________________________________________________and
hereinafter referred to as the Buyer, whose address is ________________________________________
WITNESSETH:
1. THE SELLER AGRESS AS FOLLOWS:
(a) To sell and convey to the Buyer, land in the _______________of_____________________,
County of____________________________, State of ____________________, described as:
Tax Parcel No.:____________________ Common Address:_______________________________
together with all tenements, hereditaments, improvements and appurtenances, including all lighting fixtures, plumbing fixtures, shades, Venetian blinds, curtain rods, storm windows, storm doors, screens, awnings, if any, and __________________________________________________, now on the premises, subject to all applicable building and use restrictions, and easements, if any, affecting the premises.
(b) That the consideration for the sale of the above described premises to the Buyer is:______
__________________________________________________________ ($____________) Dollars,
of which the sum of__________________________________________________________________
($_______________) Dollars, has hereto fore been paid to the Seller, the receipt of which is hereby acknowledged, and the balance of_______________________________________________________
($_______________) Dollars, is to be paid to the Seller, with interest on any part thereof at any time unpaid at the rate of ________________ (_________%) percent per annum. This balance of purchase money and interest shall be paid in monthly installments of__________________________________
($_______________) Dollars each, or more at Buyer’s option, on the _____________________day of
each month, beginning ___________________, 20____; said payments to be applied first upon interest and the balance on principal, provided, the entire purchase money and interest shall be fully paid within ____________________years from the date hereof, anything herein to the contrary notwithstanding.
(c) Upon receiving payment in full of all sums owing herein, less the amount then due on any existing mortgage or mortgages, and the surrender of the duplicate of this contract, to execute and deliver to the Buyer or the Buyer’s assigns, a good and sufficient Warranty Deed conveying title to said land, subject to aforesaid restrictions and easements and subject to any then existing mortgage or mortgages, and free from all other encumbrances, except such as may be herein set forth, and except such encumbrances as shall have accrued or attached since the date hereof through the acts or omissions of persons other than the Seller or his assigns.
(d) To pay all taxes, assessments hereafter levied on said premises before any penalty for non-payment attaches thereto, and submit receipts to Seller upon request, as evidence of payment thereof, also at all time to keep the buildings now or hereafter on the premises insured against loss and damage, in manner and to an amount approved by the Seller, and to deliver the policies as issued to the Seller with the premiums fully paid.
(If the amount of the estimated monthly cost of taxes, assessments, and insurance is inserted in the following paragraph 2(e), then the method of payment of these items as therein indicated shall be adopted. If this amount is not inserted, then paragraph 2(e) shall be of no effect and the method of payment provided in the preceding paragraph 2(d) shall be effective.)
(e) To pay monthly in addition to the monthly payments hereinbefore stipulated, the sum of _______________________________________________($_________________) Dollars, which is an estimate of the monthly cost of taxes, assessments, and insurance premiums for said premises, which shall be credited by the Seller on the unpaid principal balance due on the contract. If the Buyer is not in default under the terms of this contract, the Seller shall pay for the Buyer's account, the taxes, assessments, and insurance premiums mentioned in paragraph 2(d) above when due and before any penalty attaches, and submit receipts therefor to the Buyer upon demand. The amounts so paid shall be added to the principal balance of this contract. The amount of the estimated monthly payment, under this paragraph, may be adjusted from time to time so that the amount received shall approximate the total sum required annually for taxes, assessments, and insurance. This adjustment shall be made on demand of either of the parties and any deficiencies shall be paid by the Buyer upon the Seller's demand.
(f) That he has examined a Title Insurance Commitment dated _________________, covering the above described premises, and is satisfied with the marketability of the title shown thereby, and has examined the above described premises and is satisfied with the physical condition of any structures thereon.
(g) To keep and maintain the premises and the buildings thereon in as good condition as they are at the date hereof, reasonable wear and tear excepted, and not to commit waste, remove or demolish any improvements thereon, or otherwise diminish the value of the Seller's security, without the written consent of the Seller.
3. THE SELLER AND BUYER MUTALLY AGREE AS FOLLOWS"
(a) That the seller may, at any time during the continuance of this contract encumber said land by mortgage or mortgages to secure not more than the unpaid balance of this contract at the time such mortgage or mortgages are executed. Such mortgage or mortgages (1) shall provide for payment of principal and interest in monthly installments which do not exceed such installments provided for in this contract; (2) shall provide for a rate of interest on the unpaid balance of the mortgage debt which does not exceed the rate of interest provided in Paragraph 1 (b), or on such other terms as may be agreed upon by the Seller and Buyer, and (3) shall be a first lien upon the land superior to the rights of the Purchaser herein, provided notice of the execution of said mortgage or mortgages containing the name and address of the mortgagee or his agent, the amount of such mortgage or mortgages, the rate of interest and maturity of the principal and interest shall be sent to the Buyer by registered mail promptly after execution thereof. Buyer will, upon demand, execute any instruments demanded by the Seller, necessary or requisite to subordinate the rights of the Buyer hereunder to the lien of any such mortgage or mortgages. In the event said buyer shall refuse to execute any instruments demanded by said Seller and shall refuse to accept such registered mail hereinbefore provided, or said register mail shall be returned unclaimed, then the Seller may post such notice in two conspicuous places on said premises, and upon making affidavit duly sworn to of such posting, this proceeding shall operate the same as if said Buyer had consented to the execution of said mortgage or mortgages, and Buyer's right shall be subordinate to said mortgage or mortgages as hereinbefore provided. The consent obtained, or subordinated, as otherwise herein provided, under or by virtue of the foregoing power, shall extend to any and all renewals or extensions or amendments of said mortgage or mortgages, after Seller has given notice to the Buyer as above provided for, giving notice of the execution of said mortgage or mortgages.
(b) That if the Seller's interest in the land is now or hereafter encumbered by mortgage, the Seller shall meet the payments of principal and interest thereon as the mature and produce evidence thereof to the Buyer on demand, and in default of the Seller, said Buyer may pay the same. Such payments by Buyer shall be credited on the sums first maturing hereon, with interest at the rate provided in paragraph 1(b) on payments so made. If proceedings are commenced to recover possession or to enforce the payment of such contract of mortgage because of the Seller's default, the Buyer may, at any time thereafter while such proceedings are pending, encumber said land by mortgage, securing such sum as can be obtained, upon such terms as may be required, and with the proceeds, pay and discharge such mortgage, or purchase money line. Any mortgage so give shall be first line upon the land superior to the rights of the Seller therein, and thereafter the Buyer shall pay the principal and interest on such mortgage so given as they mature, which payments shall be credited on the sums matured for first maturing hereon. When the sum owing hereon is reduced to the amount owing upon such contract or mortgage or owing on any mortgage executed under either of the powers in this contract contained, a conveyance shall be made in the form above provided containing a convent by the grantee to assume and agree to pay the some.
(c) That if default is made by the Buyer in the payment of any taxes, assessments or insurance premiums or in the payment of the sums provided for in paragraph 2 (e), or in the delivery of any policy as hereinbefore provided, the Seller may pay such taxes or premiums or procure such insurance and pay the premium or premiums thereon, and any sum or sums so paid shall be a further lien on the land and premises, payable by the Buy to the Seller forthwith with interest at the rate as set forth in paragraph 1(b) hereof.
(d) No assignment or conveyance by the Buyer shall create any liability whatsoever against the Seller until a duplicate thereof, duly witnessed and acknowledge, to with the residence address of such assignee shall be delivered to the Seller. Buyer's liability hereunder shall not be released or effected in anyway by delivery of such assignment or by Seller's endorsement of receipt and/or acceptance thereon.
(e) The Buyer shall have the right to possession of the premises from and after the date hereof, unless otherwise herein provided, and be entitled to retain possession thereof only so long as there is no default on his part in carrying out the terms and conditions hereof. In the event the premises hereinabove described are vacant or unimproved, the Buyer shall be deemed to be in constructive possession only, which possessory right shall cease and terminate after service of a notice of forfeiture of this contract. Erection of signs by Buyer on vacant or unimproved property shall not constitute actual possession by him.
(f) If the Buyer shall fail to perform this contract or any part thereof, the Seller immediately after such default shall have the right to declare the same forfeited and void, and retain whatever may have been paid hereon, and all improvements that may have been made upon the premises, together with additions and accretions thereto, and consider and treat the Buyer as his tenant holding over without permission and may take immediate possession of the premises, and the Buyer and each and every other occupant remove and put out. In all cases where a notice of forfeiture is relied upon by the Seller to terminate rights hereunder, such notice shall specify all unpaid monies and other breaches of this contract and shall declare forfeiture of this contract to be effective fifteen days after service, unless such money is paid and any other breaches of this contract are cured within that time.
(g) If default is made by the Buyer and such default continues for a period of forty-five days or more, and the Seller desires to foreclose this contract in equity, then the Seller shall have, at his option, the right to declare the entire unpaid balance hereunder to be due and payable forthwith, notwithstanding anything herein contained to the contrary.
(h) The spouse of the Seller, for a valuable consideration, joins herein and agrees to join in the execution of the Deed to be made in fulfillment hereof.
(i) Time shall be deemed to be of the essence of this contract.
(j) The individual parties hereto represent themselves to be of full age, and the corporate parties hereto represent themselves to be valid existing corporations with their charters in full force and effect.
(k) Any declarations, notices or papers necessary or proper to terminate, accelerate or enforce this contract shall be presumed conclusively to have been served upon the Buyer if such instrument is enclosed in an envelope with first class postage fully prepaid, if said envelope is addressed to the Buyer at the address set forth in the heading of this contract or at the latest other address which may have been specified by the Buyer and receipted for in writing by the Seller, and if said envelope is deposited in a United States Post Office Box.
(l) __________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
The pronouns and relative words herein used are written in the masculine and singular only. If more than one join in the execution hereof as Seller or Buyer, or either be of the Feminine sex or a corporation, such words shall be read as if written in plural, feminine or neuter, respectively. The covenants herein shall bind the heirs, devisees, legatee, assigns and successors of the respective parties.
________________________________________ ______________________________________
________________________________________ _______________________________________
Seller Buyer
(Notary)
It must be stated here that the authors are not qualified to give legal advice and nothing in this manual is intended as a substitute for competent legal counsel. You must ask for the help of a real estate attorney before acting on the information found in these pages.
Even though many investors buy property "subject to" existing loans there is always the danger that the lender will call those loans due and payable if they learn of a title transfer. If you use this technique you must have a plan of action to protect yourself in the event the lender demands payment.
For those who are willing to take the risk a world of opportunity will be found with homeowners who are facing foreclosure. Many of those homes have little or no equity. Buying "subject to" and quickly selling with a Land Contract is one of the few ways to turn those bad situations into profitable investments.
We suggest you learn more about the opportunities in pre-foreclosure homes by reading Cash Flow Institute’s "Million Dollar Foreclosure System".
Investing in single family homes is truly a golden path to financial independence for the small investor. We hope what you have learned in this publication will serve you well and speed you down the road to success.
Remember – Risk is the price of opportunity! This document and accompanying materials are designed to provide authoritative information in regard to the subject matter covered in it. It is for illustration purposes only and presented with the understanding that the author and publisher are not engaged in rendering legal, accounting or other professional opinions. If legal advice or other expert assistance is required, the services of a competent professional should be sought. |
