Legal Question in Real Estate Law in Michigan
Land Contract - assumable or not?
Current buyers under LC defaulted on LC. Owner then gave assumption to another buyer. The new buyer then decided ''nope don't want it'' and sent the seller/holder a letter in writing to that effect. I now have been offered what seems to be the deal of century with 0 down assuming a LC on this property.
Problem is this, the RE agent acting as ''go between'' between the owner and me as the new buyer, keeps saying that the person who said ''nope don't want it'' has to sign a Quit Claim deed. Why is this? Interest in the property does not change hands until the balance is paid in full, right/wrong? She, the RE, agent now says she has to check with the title company to make sure the ''nope don't want it buyer'' doesn't have to title over his interest. This makes no sense to me. I'd like to get this done ASAP as it is a lodging place and a busy part of the season is coming up. The ''nope don't want it guy'' has his payments made until Nov 14 and I can have it, per the owner on Nov 15, but need to know the legalize involved in a ''voluntary termination'' of the LC on the part of the prior buyer.
I guess, quick question is - if prior buyer on a LC says sorry I changed my mind, why can't the owner just LC to me?
Thanks in advance
1 Answer from Attorneys
Re: Land Contract - assumable or not?
The transaction which you have described has many potential pitfalls, which cannot be addressed with the small amount of information provided. Accordingly, I can respond only theoretically to the question posed.
Often, when a person has obtained a contingent interest in real estate, such as under a land contract, and then defaults, a quit claim deed is desireable to prevent the person from claiming an interest at a later time. If the land contract vendee had good cause to default (for example, breach or fraud by the vendor), he/she might argue that he/she has a lien against the property for payments made. When a person signs a quit claim deed, he/she is giving up any interest he/she has in the property to the person named in the quit claim deed.
It is possible, but not certain, that the title insurer will not insure title to the property unless the "nope, don't want it" person gives a quit claim deed. If the "nope, don't want it" person does not give the deed, and later claims an interest or lien in the property, the title insurer would have to defend the title, possibly in an expensive court proceeding. A quit claim deed would give the title insurer comfort that it is at less risk of having to pay on the title insurance policy.
Whether the land contract is assumable will depend upon the terms of the land contract. An attorney must review the land contract, in order to be able to advise you as to whether and how it may be assumed.
There are many other facts which will likely impact your rights. This response is not intended as legal advice, and it should not be relied upon as legal advice. Your rights and obligations will depend upon the particular facts and circumstances affecting this matter. You should consult an attorney in your area to discuss all of the relevant facts and circumstances. No attorney/client relationship is created as a result of this response. I may be contacted at 248.788.8225, to discuss this or other legal matters.
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