land contract or bankruptcy

west9491April 9, 2011

Ok I need some advice. My husband and I have a singlewide on 3 acres of land, weve been paying on it for 5 years and its now 3000.00 mmore than the total loan that we even got on it. So were getting nowhere on the singlewide, we want to build a house but we wouldnt be able to do it on our land because our single wide and land are together in a loan. We were going to file bankruptcy on it because were filing anyway because of us cosigning for someone and they didnt pay it so now were getting sued. Now someone has asked us to do a land contract on the singlewide, it does seem like it would be better on our credit other than doing the bankruptcy but its still risky. Oh and i should also tell that we found 5 acres that we want to build on and get everything put in my mother n laws name til bankruptcy is over. So with all that said, i need some advice on what you guys think i should do? HELP!?

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Yikes, what a situation. I think you need professional advice, not sure you can get away with the land-in-mother-in-law's-name stuff with a bankruptcy (surely, it is illegal).

    Bookmark   April 9, 2011 at 6:18PM
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Your mortgage probably has a "due on sale" clause. That means that the entire amount of the mortgage comes due when you sell on the land contract.

    Bookmark   April 9, 2011 at 6:58PM
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I would suggest very strong you get legal advice to protect all.

    Bookmark   April 9, 2011 at 8:43PM
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What exactly is a land contract? This person just wants to buy the land? And obviously you would get less money than if you sold the whole thing? Can you sell the trailer to someone else? Would you come out with enough money to pay it all off if you sold both? And if I'm understanding this land contract thing correctly, wouldn't the bank have a lien on the whole thing? Explain some more.

    Bookmark   April 9, 2011 at 11:26PM
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A land contract is basically seller-financing.

They are more common in some states than in others.

Here is a link that might be useful: land contracts

    Bookmark   April 9, 2011 at 11:51PM
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How much is the loan you cosigned for? Unless it's truly something you have no hope of ever paying off (in which case you shouldn't have cosigned in the first place...but I'm assuming you already figured that out), bankruptcy could be an overreaction that will end up causing you many more problems than it solves.

Can you afford the payment on your land+trailer? If so, again, the fact that you're making only slow progress is not a reason to dump it. Selling it to someone else and buying a different piece of land doesn't solve the problem. And filing bankruptcy won't exactly help you get a loan to build on lot #2.

If it were me, I'd work on negotiating a settlement with whoever's about to sue you, tighten up your budget and pay extra on your existing mortgage so you can get some equity. Down the road, you'll have money (or sufficient credit/savings) to build on the lot you've got.

    Bookmark   April 10, 2011 at 9:15AM
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"My husband and I have a singlewide on 3 acres of land, weve been paying on it for 5 years and its now 3000.00 mmore than the total loan that we even got on it."

What kind of loan amortization is being used?

Unless you have negative amortization or something besides a simple loan the balance only goes up if you fail to pay and expenses are tacked on to the amount due.

    Bookmark   April 10, 2011 at 10:01AM
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Thanks for the link Badgergrrl. I understand now. I've always heard it called "holding the mortgage."

    Bookmark   April 10, 2011 at 11:17PM
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"I've always heard it called "holding the mortgage.""

Not exactly the same.

In many cases no mortgage is recorded, and sometimes not even the land contract itself.

The seller remains the titled owner of the property.

When the agreed upon payments are made the seller THEN executes a deed to transfer the property.

One of the risks as a land contract buyer is that the seller may not be able to convey clear title.

There are numerous ways the title could become encumbered, from court judgments, liens, to the IRS.

These encumbrances would have to be removed by the seller to convey clear title, if they have the money to clear them.

As a buyer you could fulfill your side of the bargain, but end up not getting clear title.

I have actually held mortgages for buyers a couple times.
The deed of trust (Virginia is a trust deed state) along with the note are recorded.

The only thing I have to do as trustee is re-convey the property when the note is satisfied.

If there are any other encumbrances at that point, they are the owners, not mine since all I had was a trust deed.

I could no longer encumber the property except as the trustee under the terms of the trust.

    Bookmark   April 11, 2011 at 2:22PM
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