Can an appraisal use a land contract sale as a comparable?

[TerryRohrer]

They can get a mortgage to pay off the LC but they can't get a HELOC mortgage, cash out mortgage to remodel or add on, etc.

Of course they can get a mortgage to pay off the LC in the same manner as anyone buying property from another owner, typical sale.

I have seen second liens behind contracts. As always, depends on their creditworthiness and equity.

 

[Mark K]

Which would mean that the seller retained the bundle of rights until the LC is paid in full.

Some, but not all of the rights are transferred, as I've said before. The buyer has rights somewhere between a lease and a sale.

 

[Mark K]

I have seen second liens behind contracts. As always, depends on their creditworthiness and equity.

If they did that in this state, the lender would be lending on the contract only. There may be some instances in the world of commercial financing where this might occur but I've never heard of it. Again, in this state, the seller is still the owner of record. If the lender performs a title search it will show the seller as the owner and would also show a memorandum of LC. The lender would have no recourse to the real estate since the LC holder didn't sign off. It would be very risky for the lender in this case.

 

[TerryRohrer]

If they did that in this state, the lender would be lending on the contract only. There may be some instances in the world of commercial financing where this might occur but I've never heard of it. Again, in this state, the seller is still the owner of record. If the lender performs a title search it will show the seller as the owner and would also show a memorandum of LC. The lender would have no recourse to the real estate since the LC holder didn't sign off. It would be very risky for the lender in this case.

Public record still shows seller as owner here, but also shows contract buyer when recorded. That limits the seller's rights to financing, as well.

 

[Mark K]

Public record still shows seller as owner here, but also shows contract buyer when recorded. That limits the seller's rights to financing, as well.

Same here but it doesn't completely preclude the seller from getting a mortgage. However, many contracts prevent the owner from getting a mortgage or other lien beyond what exists at the time of contract execution.

 

[residentialguy]

None of this is universally accurate. Sellers often prefer to finance. They can't get 8% cds. They can spread gains over multiple tax periods. The buyer can refinance the day after, with the funds paying off the contract, which immediately triggers recording of the deed conveying title to buyer.

That may very well be... but the question is: did it affect the price? Would the typical conventional financed buyer pay the same amount for the property? If yes, then no adjustment necessary.

 

[Terrel L. Shields]

might use one as a comp but since the property did not actually 'sell' (ownership transfer) I'd be reluctant. If recorded, the assessor will note on the property record card that the transfer is LC

If the deed isn't in their name, how do they get a mortgage?

The lender can ask the mortgagee to subordinate their interest to a second. Not a good move on the part of the seller, but can happen. I was offered $1000 to swap places with a mortgagee bank once when my lien was deemed first in line. I refused.

did it affect the price?

Here, typically you see the interest rate higher and terms shorter (10 yr vs 30 yr, e.g.)

 

[Artemis Fowl]

Public record still shows seller as owner here, but also shows contract buyer when recorded. That limits the seller's rights to financing, as well.

Public record in MI generally places holder in owner field, payer in taxpayer field (this does vary by municipal unit...ok as long as consistent across the unit). Date contract is entered is considered a transfer by statute.

 

[residentialguy]

Here, typically you see the interest rate higher and terms shorter (10 yr vs 30 yr, e.g.)

Nice info, but did that affect the price?

 

[James Mpls]

Can an appraisal use a land contract sale as a comparable? What adjustments should be used, if any, because it was a land contract sale?

It depends.