Q. I entered into a land contract to purchase my house about six years ago. I have been sending the monthly payments to a P.O. box in Missouri and have been paying the real estate taxes myself. I have had no contact with the seller in over four years.
I am now ready to get a loan and pay the balance on the land contract. I put a note in my last payment telling the seller that's what I wanted to do but I didn't get a response. I sent another letter a couple weeks later but again, no response.
The seller was an older gentlemen and I'm now wondering if he is receiving the payments or is even alive. Maybe someone else is pocketing the payments and knows once I pay off, the party is over.
What can I do to get this paid off and get the property put in my name?
A. For those unfamiliar with land contracts, also known as installment agreements or Articles of Agreement, a quick primer. A land contract is an agreement between a purchaser and seller to purchase seller's property over a period of time.
A typical land contract for a $200,000 piece of property might call for purchaser to deposit $10,000 with the seller and pay the balance of $190,000 in five years, amortized over 30 years at an interest rate of 5 percent. By amortizing the payments over 30 years, the payments are kept low. The balance, however, which will be most of the remaining $190,000, must be paid in full in five years, sometimes known as a balloon payment. The purchaser would be required to pay the balance in full either through the refinance of the property, with other funds or through the sale of the property.
These types of transactions occur when the purchaser cannot obtain funds through conventional loans or the seller is having a difficult time selling his or her property. The advantage to a purchaser is he or she is able to purchase a property and (hopefully) build equity while making the payments, even though conventional financing is unavailable. The advantage to the seller is that he or she is able to create cash flow from the property and in the event purchaser defaults on the agreement, terminating the agreement is far simpler than foreclosing on a mortgage. In the event of a default, the seller simply retains all the payments made by purchaser.
Now to your problem. My first thought would be to stop making the payments and see what happens. To terminate your rights under the agreement, the seller is required to send you a Notice of Forfeiture, which is a demand that states unless you bring your payments current within a certain period of time, usually 30 days, your rights under the land contract are terminated. If you receive the notice, you can respond by requesting a statement indicating the amount due under the agreement.
Things get a bit trickier if there is no response to your stopping the payments. You could search the county records to determine who the owner of record is. Presuming it is the same owner you contracted with, attempt to contact him or her. Obviously, a good start would be the city where the P.O. box is located. Presuming you locate him or her, send a letter demanding a payoff amount.
If you still cannot get any cooperation, you are probably stuck with filing a suit to quiet title in the county where the property is located. You would serve the owner and he or she would be required to appear in your lawsuit and answer to the court why he or she is not cooperating with the payoff. In the event the owner is served and fails to participate in the lawsuit, you could probably obtain a default judgment. You would then ask the court to issue a judicial deed, conveying the property to you.
• Send your questions to attorney Tom Resnick, 345 N. Quentin Road, Palatine, IL 60067, by email to email@example.com or call (847) 359-8983.