4/24/2006

Advice from Nashville's leading Financial Aid Advisor Dave Ramsey

 
Dave Says
By Dave Ramsey
Author of:
Financial Peace and
The Total Money Makeover

"Sell a home on contract?"


Dear Dave,

My wife and I have two homes. One we built just after we were married, and we owe about $100,000 on that one. The other belonged to my grandmother, and we’re living in it now. I recently found an opportunity to sell the first house on contract to a young couple who can make a $4,000 down payment then buy the house in about a year. What’s the best way to go about this?

James

Dear James,

I wouldn’t do a land contract in this situation. I’d make it a lease with an option to purchase, letting the $4,000 apply to the purchase price. 

Now, make sure documentation states if they’re in default on the lease that the option is void. That way, if they don’t pay you only have to evict them, not foreclose on them. The young couple you’re talking about will get the same benefits, but it puts you in a much better position.

A land contract could cause you all kinds of nightmares, because then you’d have to foreclose on them in case of default no matter what.

- Dave

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