Can someone explain to me the main differences?
From what I heard w/ a LC the taxes need to be paid up front as if the home was sold
that day?? Can someone give me some more info. on that?
Thanks
A Land Contract (no longer legally practical in TX) is a way to buy a property with very little money down. The seller retains title until the buyer pays-in enough principal - usually the equivalent of a normal down payment. That amount is pre-agreed-to. At the point the pay-in has been reached, the seller formally transfers the title to the buyer. The seller continues to pay the taxes until title has been transfered, but he collects the money with which to pay the taxes from the buyer. Effectively, the sale takes place immediately even though title doesn’t transfer. A major drawback in LCs is that if the buyer is late on so much as one payment, he can loose the property and all that he’s paid into the deal.
Rent-t-Own (Lease-Option) is a different agreement. The seller “must” sell but the tenant/buyer “may” buy. So the would-be buyer simply rents the property for a period of time, say one year, while separately having executed the right to buy the property at the end of the rental term for a fixed price established at the start of the rental period. During the rental period, the landlord is still the owner and pays the taxes as always. Hopefully, he also collects enough rent to pay his own PITI, maintenance, management, VF, etc. But there is no “sale” unless the tenant/buyer exercises his option. If the tenant/buyer does not exercise his option, he usually looses his option money payment.
So while the outcome in both cases may turn out to be the same, the approach is much different.