• Make sure the Land Contract specifies payment terms – including repayment amount, interest rate, and any late fees charged.
  • Payment terms may involve a down payment or a balloon payment.
  • Pay attention to default provisions or prepayment clauses.
  • The interest rate for a Land Contract cannot exceed 11%.
• The Land Contract should specify the date of possession. Typically, possession occurs at closing, but parties are free to negotiate terms of possession.
  • Remember that a Land Contract does not convey legal title to the purchaser, instead the purchaser acquires equitable title with the right of possession.
• Check for a clause requiring the Seller to prepare and convey a deed once the Land Contract is paid in full.
  • Once the land contract has been paid in full, the Purchaser is entitled to a deed from the Seller conveying legal title to the property.
• Both parties should confirm whether there are any limits on either parties’ ability to mortgage the property.
  • Both the Seller and Purchaser have the right to grant a land contract mortgage.
• Who pays property taxes? Typically, the Purchase is responsible for paying the property taxes on a Land Contract, so the agreement should contain a clause to that effect.
• Land Contract transactions must still comply with State law governing lead paid disclosure and seller disclosures
  • As with any other sale of property, a purchase agreement is essential.
  • It is always recommended that a Purchaser have the property inspected, regardless of seller disclosures.
• Do not forget to file the necessary Affidavits with the Township Assessors office. That includes:
  • Property Transfer Affidavit – required to be filed within 45 days of the transfer of property
  • Principal Residence Exemption – if the Purchaser is claiming the property as Principal Residence
  • Rescind of Principal Residence – if the Seller had held the property as their Principal Residence prior to the sale

Title companies are responsible for reporting the sale of real estate transactions to the IRS. The form used is a 1099-S and is signed by the Seller at closing.

The 1099-S form notifies the IRS of the sale and states the seller’s gross proceeds.

A taxpayer is allowed to exclude from gain up to $250,000.00 ($500,000 for some married taxpayers filing jointly) on the sale of a taxpayer’s principal residence, provided that, the property has been owned and used as the taxpayer’s principal residence for a certain period of time (at least two of the last five years before sale of the property).

In exchange for the 1099-S form, a Seller may be asked to sign a “Certification for No Information Reporting on the Sale of Exchange of Principal Residence.” This form completed and signed by the Seller is used to determine whether a sale of real property must be reported to the IRS. If the Seller answers “yes” to certain assurances, no information reporting is required.

These assurances include:

• The Seller owned and used the residence as their principal residence for a period of two or more years during the five-year period prior to the sale of the property
• The Seller has not sold another principal residence within the last two years
• No portion of the residence has been used for business or rental purposes, and
• That the sale of the residence is $250,000 or less OR $500,000 or less for married couples filing jointly (conditioned on the first three assurances)

If you sold property, it is recommended to consult a Certified Public Accountant to discuss the tax implications of that sale and whether you are able to exclude the gain from your sale.

There’s been no slow down in real estate pricing during February 2022 for the five county area of Michigan.

There were fewer sales, fewer days on market, and higher average, median, and total sales when comparing February 2022 to February 2021. The good news is inventory has not dropped too much to meet the demand. There were 148 listings in February 2022, down 14% from last February listings of 172.

Every County experienced a higher sales volume, except Kalkaska county. Their total sales, volume, average and median prices were down from February 2021.

Leelanau saw the greatest percentage increase in dollar volume, average price and median price.

See the entire report by clicking here or the image below.