- So if you're closing a seller financed real estate deal
with a land contract, there's a lotta different details
and information that gets baked into these documents.
And it goes without saying
that one of the most important things
you'll have to complete in this process
is the actual land contract document itself.
Which is also known as a contract for deed in some areas.
And this is the ultimate loan document
that lays out all the terms and conditions
that both the buyer and the seller
have to adhere to for the life of this loan.
And understandably this is a part of the process,
it can be really intimidating to a lotta people.
And in a lotta situations out there
it makes all the sense in the world
for an attorney to take a look at all the information,
prepare all the documents, the whole nine yards.
But there are some deals out there,
say if I'm selling our property for a relatively low price
and it's just a vacant lot,
there's not a lotta complexity to the deal,
in those kinda situations I have no problem
filling out my own land contract form,
simply because I understand how the process works
and I know what kinda terms and conditions
belong in that document and what I'm willing to accept.
And there's a service out there
that can really come in handy in these kinda transactions.
And it's called Rocket Lawyer.
And the thing I like about Rocket Lawyer is that
it makes it really, really easy to just answer
a number of questions and input some information.
And it generates the full, complete document for you.
Which you can download as like a Word document
and you can edit it further if you want to
or you can save it as a PDF and just print it off
and complete it right there.
So I'm not necessarily telling you
when you should or shouldn't use this kind of service.
That's really up to you to decide.
I just wanna make you aware that this service is out there.
And what I wanna do in this video is just take you
through a hypothetical example of how to use the service
to complete a land contract.
And I think when you use this kinda service,
especially the first time you're doing it,
it still makes sense to run it by an attorney
just to make sure
that all the state specific requirements are met
and that it gives you the ability
to do an non-judicial foreclosure
if your state allows that option.
Just all that kinda stuff that may not be
baked into this sort of boiler plate template.
But if you're in the real estate business
and you're doing land contracts,
I just think it's a good option
for you to be aware of.
So I'm just gonna take you through the process
and you can see how easy it is.
And if it looks like a good option for you,
I do have an affiliate link beneath this video
that you can sign up for Rocket Lawyer through
and I'll get a small commission for that.
And if you do that, I thank you very, very much
for your support and if not, that's totally cool too.
I wish you the best with whatever service
or template you're using.
But if you've got a few minutes, follow along
and I'll just show ya how Rocket Lawyer works.
So again, I have a Rocket Lawyer account.
So I'm just gonna take you through the back end
and show ya how to get started.
Once you're signed in you can go to this tab over here
that says documents.
And click here where it says start new.
And then all you have to do is search for
the type of document that you're trying to create.
And a land contract also goes by the name Contract for Deed.
So I'm gonna type that in here.
Actually just type in the word deed
and then you can find all these things.
And this is the one I'm looking for.
So click on that and then once you're here,
all you have to do is start answering questions.
And it will compile the document for ya.
So in this example I'm going to do this
in the state of Michigan.
So it's already on Michigan, just click Make Document.
And then the first thing here, we're just gonna say
what type of property it is.
And in my case it's gonna be a vacant lot.
Or alternatively you could also pick
vacant lot to be used for residential real estate.
I know that's a really common type of property that I get.
Where it's like a buildable lot
and the only thing you can do with it
is build a house on it.
I wanna go with this one here.
And then right here we're just gonna put in
the physical address of the property.
So I'm just gonna make up an example here.
And we'll do 48906.
Click Continue.
And then who is selling the property?
In this case, I'm gonna say that I'm the seller
and I'll just put in my name here.
Or alternatively if I was selling this
in the name of my company I could put that in here too.
ABC Company, LLC, something like that.
In fact, let's go with that,
'cause that's usually the way my deals work.
Then we'll click business here.
And then who will sign this contract for deed
for ABC Company?
In this case I'm just gonna put in my name,
'cause I'm a signer on behalf of the company.
And I'm the manager of my LLC.
If you've got an LLC like I do,
the title kinda depends on
how your operating agreement is set up.
If you have one.
You could also put in member here, if you wanted to.
But mine is set up so that I am the manager
and I control everything.
So that's why I'm putting that there.
And then what is the physical street address
of ABC Company.
This is where I'll just put in my actual street address.
And there it is.
And then we'll hit Continue.
And then where will this seller sign the contract for deed?
This is just asking where I am going to be located
when I sign the document.
Because that determines who the notary is gonna be.
And just so you know, if you wanted to
you could skip this step altogether
but just clicking Skip.
And then all it would do is in the end document
there would just be a blank there.
And somebody would have to write it in by hand.
But since I know, you know where I'm gonna be
most likely when I sign this,
I'll just go ahead and put that in here.
So I'll put in Michigan and then Kent County, then Continue.
And then who is the first person that will witness
this seller signing the contract for deed.
I don't necessarily know this yet,
but I do know that they're most likely gonna be
in the state of Michigan,
so I'll just put that there and then hit Continue.
And then sellers, just got ABC Company like that.
And then who is buying the property.
This is where we put in
the name of our buyer slash borrower.
We'll just make up a name here.
John Smith.
This will just be a single person.
If you wanted to put this in the name of a husband and wife
you could, you know check that.
Or business or trust, but I'll just keep it simple,
do a single person here.
Now this is where we put the physical address
of our buyer.
So this would be wherever they live
or work or want to receive any kind
of notification about the payments on this property.
So I'll just make up another street address here.
And then where will John Smith sign the contract for deed?
We're gonna say that he's gonna do this in Michigan
in Wayne County.
And by the way, if you ever get stuck on anything
in this document, say if you just don't understand
what you're supposed to putting in here
or if you don't understand
what it's telling you to do with each item,
Rocket Lawyer makes it very easy
to just ask a one off question
about that item to an actual attorney.
And then they will get you that answer back.
Usually within the same day.
Just keep that in mind.
Usually each one of these items does a really good job
of explaining what you're supposed to do.
But if you come across something
that just doesn't make sense, feel free to ask a question.
That's part of what you're getting
as the cost of your membership.
And then this thing is the same deal
where we're just gonna put Michigan
and leave the rest blank.
And then we're going to just hit Continue.
And then when will the contract become effective?
We're gonna say that we're gonna close this deal
on May 1, so that will be the date at which
all of the stuff is officially set in stone.
And then what is the legal description
of the property being sold under this contract.
Now the legal description is usually
a very confusing string of words and numbers,
typically doesn't make a lotta sense to the layperson.
But it should look something like
section 10, range 5, block 8, lot 14, City of Lansing.
Sometimes the legal description will be very short and sweet
and to the point and other times
it will very long and complicated, but whatever it is,
you can usually find this on your county website
or on the copy of the most recent deed of record.
Or alternatively, if you're a subscriber
to a service like AgentPro247 or RealQuest,
a lotta times you can find those legal descriptions
in those databases as well.
It doesn't necessarily have to make sense to you
but it should match exactly with what you see
on the most recent deed or on the county website.
Because this literally describes what property
is being transferred.
So this is definitely a part of the document
that you do not wanna mess up.
So you just keep that in mind.
And hit Continue.
And then who should the payments under this contract
be made to?
In this case if you're gonna be using
a loan servicing company you would put
their name and address in here.
Or if you're gonna be servicing it yourself
by collecting physical checks in the mail
or having them automatically wire the funds
from their bank account or from their credit card.
In those cases then you would put
your name and address here.
So in this experiment I'm gonna assume the later.
So I'll put my company name in here,
put the address in there and hit Continue.
And then what is the total purchase price
of the property sold under this contract?
Keep in mind this is not just the loan amount,
this is the total purchase price.
So in this example, I'm gonna say it's $25,000.
Hit Continue.
And then will the buyer have to pay interest
under this contract?
Yes.
I almost always do 9.99% interest on mine,
but there have been times when I've done 0%
or had other percentages.
Whatever you wanna do here is obviously
completely up to you.
For the beginning date we're gonna make it
the same as the closing date.
So I'll put May 1 in here.
And then has a down payment or any earnest money been made?
In this example we're gonna say yes.
I almost always require some kinda downpayment
when I sell a property.
And the amount in this case, we're gonna say it's $5,000.
Which will make the loan amount exactly $20,000.
And then what are the payment terms.
In all of my experience, I've always done this top one here.
Installment payments of principal and interest.
But if for some reason you wanna do something different
you can obviously choose a different option here.
What is the payment agreement?
This is really just saying what the payment are gonna be
and if there's gonna be a balloon payment at the end
and how long it's gonna take them to pay it off.
Depending on the loan amount,
I'll usually make the term of mine
anywhere from three years to 10 years at the very most.
I kinda decide on that number based on
how much the borrower is willing to pay per month.
And how much they can afford along with
how quickly I need to get my cash back.
In this case, I'm gonna say
that it's gonna be a five year term,
which is the same as 60 months.
And balloon amount is gonna be nothing.
I'm just gonna get 60 equal payments
and then get this thing paid off.
And then type of installments, this is gonna be monthly.
Then we'll hit Continue.
And then will a late fee be charged
if an installment payment is late?
I always say yes, just 'cause it's kind of a disincentive
for somebody to miss a payment or pay late.
So I'm gonna keep it as yes.
And then the amount that I'll put in here
is just 25 bucks.
I'm gonna give this person a grace period of,
oh what the heck we'll just say five days.
And then for this one we're gonna give 'em
an extra 10 days.
So basically they have until the 5th of each month
before their payment is considered late
and they owe an extra $25 late fee.
And then they have until the 15th of that month
until it's considered in default.
And we can actually take some action against them.
And I'm obviously not saying you have to use these numbers,
that's just what I would do in my situation.
If you wanna do something else and follow
a different time line with different consequences,
you can obviously feel free
to plug in some different numbers here.
So once that's done, we'll click Continue
and then here can early payments be made without penalty?
We're gonna say yes.
And then what type of early payment will be accepted?
I'm gonna say any amount.
And then will the buyer receive a discount
if the contract is paid off early?
I'm gonna say no, but if you want to
you could do that, obviously.
Is there any debt tied to this property.
In my case, I always own all my properties
free and clear.
And if I don't, I'm not gonna attach another loan to 'em.
So in my case I'm always gonna say no.
But if you've got a different situation
then you could obviously answer differently.
Will the seller be allowed to use the property
as collateral on future loans?
So basically this would just mean
that if I still own the property
and it wasn't paid off, could I also tie up
this property to take out another loan?
And I just kinda think that's sorta uncool
to the borrower, because that would mean
that the property that they are paying for
and thinking they're gonna own
could potentially be taken before they paid it off.
Which I think is just kind of a sleazy thing to do.
So I'm always gonna say no on this.
And then who will have possession
and use of the property until the contract is paid in full?
This is pretty much always gonna be the buyer.
But if for some reason you wanted to say no buyer,
you can't even touch this thing
until it's completely paid off,
then you could also say this instead.
But usually I set mine up this way.
So I'm gonna go ahead and make it like that
and move forward.
And then has the seller agreed to perform
any specific repairs to the property?
And I'm pretty much always gonna say no.
It's being sold as is.
And then who'll be responsible for maintaining insurance?
When you're dealing with vacant land,
insurance is not usually a huge issue.
If this was a house and a lot more things
could go wrong with it,
then the insurance costs would be a lot higher.
And it would be something that you would probably
wanna have more negotiation on,
whether it's gonna be paid by the buyer or the seller.
But a lot of times with vacant land,
if you even do get insurance,
it's like very, very, very cheap.
So for that kinda property,
whoever does end up footing this bill,
it's usually not a huge deal one way or another.
And then who'll be responsible for paying taxes
assessed for the sale of this contract?
I'm gonna say this and then usually what I do
is I'll have the buyer actually pay me
an additional amount each month,
which I just store in an escrow account
and then I'm the one that actually pays the tax bill.
But they are essentially paying me
so that I can pay that bill.
So that's kinda how I have mine set up,
just so that I can be 100% assured
that it's getting handled, is that I make them pay me
a little extra and then I pay the bill for them.
Because a lot of times these buyers are gonna forget
or they're gonna do it late
and as long as I am technically the owner of that property,
I don't want this being left to chance.
I wanna make absolutely sure that those taxes
are being paid current.
So that's how I'm gonna do mine and set mine up.
And then who'll be responsible for paying
real estate taxes and assessments
through the term of this contract?
We'll say buyer again.
And then what type of deed'll be used
to convey the property to the buyer
upon completion of the contract terms?
This really just depends on how certain I am
about the clearness of the title.
So for example, if when I bought it I got title insurance,
and I know that this thing is clear
and there are no issues.
In cases like that, I would choose
either like a warranty deed or a special warranty deed.
But if it's a property that perhaps
recently went through a tax sale
or perhaps if I did not do all that thorough of a job
of doing a title search on the front end
and I'm just not ready to put my neck on the line
and promise somebody that the title is clear,
in those cases I would choose something like this.
I've got another video and some stuff on the blog
that talks about some of the differences between
these two types of deeds.
So if you're not really sure about that,
feel free to check out that video.
But in this case I'm just gonna pretend that I didn't do
all that thorough of a job with the title search.
I just looked at the most recent deed and that was it.
And because of that I'm not ready to do a warranty deed.
At the very most I might do this,
which just guarantees that there were no new title issues
that came up during the time period
when I owned it.
But even that, I don't know.
If you wanna have absolutely no liability
attached to yourself, you would do the quit claim deed.
And some buyers are not gonna be okay with that,
but if they don't care it's the least risk
way for you to do it.
So that's what I'm gonna go with here.
And then who'll be responsible
for the costs of recording the deed?
We'll say buyer and they are going to pay that money to us
and then we will get it recorded after the closing.
Who will be entitled to claim the property
for tax purposes?
Let's say the buyer in this case,
but obviously you could do either one if you want.
And then which state's laws will apply to this contracts?
And in my case I am also in Michigan
as well as the property is, so I'm just gonna say Michigan.
And then enter any special provisions you would like
included in this contract.
But I'm just gonna skip this part for now,
'cause it doesn't really apply in my example here.
And then who is preparing this contract for deed?
I'll put myself and then Continue.
And now it is creating my contract for me.
And so once this document has been generated
you can go here and let's just download
a PDF of it, take a closer look at how it reads.
And then we can scroll through it here.
But if you read through this document carefully,
especially the first time
just so you understand what it says,
it really just outlines the terms of the loan agreement
and it has all the information that you put in there
and answered earlier on.
It looks like it actually
calculated the payment for us automatically.
Sometimes you'll have to manually put that number in,
but this particular form looks like
it just did it by default.
That's kinda nice.
And you just kinda wanna go through here.
If when you're going through this document
you come across anything that you want to change
or edit or get rid of, or anything like that,
it's really very easy to do that.
You would just go back here and then click edit.
And then we will do this change answers.
And then I'm just gonna quick, scan through this
and make sure all the answers are right here.
And then after reviewing that contract,
I couldn't find any place in there
where I was able to fill in this information.
And that should actually be filled in,
so I'm just gonna go ahead and do that now.
And essentially all this is saying
is that when you get this document signed
and notarized by all parties,
and you mail it to the county register of deeds
to get recorded, where are they supposed to send that
original document back after they've,
you know put their sticker on it
and run it through their system?
So I'm just gonna put my location in here,
because I want them to send it back to me,
because I'm controlling the flow of this documentation.
Hopefully that all makes sense.
Hopefully you found that helpful.
Again, Rocket Lawyer, you don't necessarily have to use it,
but I've just found it's a lot easier
than trying to work with a template.
Because when you have just a straightforward template,
it gives you a lot of potential areas for you to miss stuff.
Whereas you can see with Rocket Lawyer,
it just literally took you through each item step by step
and you literally had to tell it
if you didn't wanna answer a question.
So you're fully aware of everything you're missing.
In terms of the cost of Rocket Lawyer,
it's really not too bad.
If you go over here to the pricing page,
you can kinda see at the time of this recording,
these are what the two options are.
This is the one I'm doing right now,
the premium subscription.
And if you wanna pay for it yearly,
if you know you're gonna use it year round,
you can save 20% on that.
As you can see, I mean it's not necessarily cheap,
but it's not like horribly expensive either.
Especially compared to the cost of using a lawyer
for all of these things.
If it's a simple enough deal and if you know
what you're doing, it's not too bad
to use this to prepare all of your documents
for land contracts and things like that.
So anyway, I mean it's just an option out there
and it's what I'm using right now
for a lot of my stuff and it's working pretty well for me.
So that's how you create land contracts
with Rocket Lawyer and that's how you can do it too.