Issue Date: August 24, 2007

"Point of Sale" Talk is Back

By Jody Zink
Licensed Realtor in Ohio & Michigan

It's made waves in the past but always seemed to drown in committee somewhere in One Government Center.

The latest proposal requires Toledo homes being sold on land contract be recorded and comply with a minimal habitability requirement. Sellers would need a Certificate of Property Compliance or CPC before they could convey any interest in the property using a land contract.

A land contract is a real estate installment agreement where buyer makes payments to seller in exchange for the right to occupy the property-- usually 1-2 years. The terms are based on an agreed upon purchase price, minus a cash down payment (paid up-front, usually non-refundable) and an interest rate. When the contract expires, the buyer is expected to satisfy a balloon payment with a conventional loan, thereby paying the seller.

More often than not, land contracts are used when buyers can't get traditional financing. They're considered too “high-risk.” The seller in this case takes a risk by partnering with such a buyer. If a buyer has any hope of buying, they are looking for a seller willing to take that risk.

Sellers in today's market are also under financial stress. Perhaps they're moving away, laid off, or owe more on their property than it's worth. Lynn Fruth of Danberry Realtors would argue that the vast majority of sellers on land contract are just trying to sell their property. “They would love to have a buyer with traditional financing buy the property but that does not happen. And guess what? With the sub-prime finance market crisis, a huge number of buyers that would have qualified for a loan over the last several years will be unable to do so for perhaps years to come.”

Mr. Fruth points out that doesn't mean buyers shouldn't have full knowledge of the property's condition. They should. Buyers working with Realtors will usually have the property inspected as a condition of purchase. Even when defects are discovered, it's not uncommon for buyers to close without repairs being made. “Upside down sellers didn't have the resources to make repairs for their own benefit when they lived in the property and they don't have resources to make repairs at the time of sale either.”

Perhaps all these efforts pushing legislation would be better spent on trying to educate buyers.

Jim Loss of Loss Realty Group says by working with Realtors, buyers learn the importance of getting full-service home inspections. A proposed ordinance like this one may actually discourage them. Inspections initiated by buyers will likely be far superior to ones just looking for the “minimum habitability standard” required in the ordinance. “Added protection is just one more reason to use a Realtor.”

Not only could burdensome regulations create red tape, hoops and unnecessary delays, a willing buyer and seller could be unable to complete a transaction at all. Point of sale legislation could wind up hurting the very people it is intended to help.

Jody Zink is a licensed REALTOR in Ohio and Michigan with the Loss Realty Group. Her column appears every other week in the Toledo Free Press. She can be reached at jody@jodyzinkrealtor.com or 419-725-1881.