Land contracts, like New Coke, never caught on in Florida for a number of justifiable reasons. Quite often I am asked if the buyer can enter into a land contract or in some states referred to as an Agreement for Deed.
Land contracts are not generally utilized in Florida for four reasons.
1. The State of Florida views a land contract as a transfer of interest and therefore collects from the seller a documentary transfer tax on the property as if the property is sold, despite the fact the seller does not convey a deed.
2. The State of Florida views a land contract as borrowed money and therefore collects an intangible tax and documentary stamps from the buyer as if there was a note and mortgage involved.
3. The State of Florida views a buyer’s interest in a land contract as an equitable interest. In order to protect the buyer, the land sales contract must be recorded. Regardless of whether or not actual title is conveyed in the event of a default a seller must go through a complete and total foreclosure process to obtain a clear title.
4. Since title remains in the name of the Seller, in the event a buyer has a party or guests on the property and there is an incident, the Seller is the one that remains liable and is open to potential lawsuits.
As a result there is little or no benefit in Florida to a land contract. Whenever possible, I recommend a Seller actually sell and convey title and take back a mortgage on the property. This method eliminates the seller from any liability and provides a first lien on the property.
Another option is a lease option. Typically this is not advantageous to the seller. In this present environment it locks the seller into a low price and allows the buyer to walk away should prices not go up.
If you have any follow up questions on Land Sales Contracts and/or Lease with Option to Purchase, please feel free to e-mail me.