How to Foreclose on a Private Contract Home Mortgage
Often, if a homebuyer does not qualify for traditional lending, he may be able to purchase a home using a private contract home mortgage. In these contracts, the seller keeps the deed to the property instead of becoming a lien holder on the deed as in a traditional mortgage, and the buyer makes monthly payments until he pays the full contract price. Depending on the land contract, foreclosure is a remedy for sellers if the buyer does not make payments as agreed.
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Instructions
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Read your contract to determine whether it grants you the right to seek forfeiture. Forfeiture provides the buyer the opportunity to bring all arrears current and continue with the payment arrangement. If the buyer does not pay the amount owed, the property reverts to you. Forfeiture is a simpler process than foreclosure.
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Send the buyer a notice of your intent to accelerate the loan. This notice informs the buyer that because of default, the full contract amount is due immediately. Send the notice by certified mail and retain your receipts for documentation.
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Go to the circuit clerk's office in the property's jurisdiction. Pay any required filing fees and file your foreclosure complaint against the buyers of the property. Serve the buyers with the court papers. The process of serving a summons varies based on the state where you are filing the complaint. The circuit clerk can inform you of the requirements for serving a summons.
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Wait during the time the state provides for the buyer to answer your complaint. If she files her answer with the circuit clerk's office, you will receive a copy of the answer with the scheduled court date. If she does not answer the complaint, you will receive a default judgment from the court.
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Go to court on the scheduled date. Take a copy of the contract, documentation of missed payments and any conversations you had with the defendant while attempting to collect the owed money. The judge may allow the defendant the opportunity to pay the arrears or pay the entire balance, or he may order the property sold at a sheriff's sale.
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Wait the time specified in your state as a waiting period. The waiting period gives the defendant time to arrange to pay for the property and allows the sheriff time to publish any notices of the sale.
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Attend the sale, and bid on the property if you wish to keep it. Typically, you will be the only bidder and can retain your property if you bid the judgment amount. It may take as long as six months to receive the title to the property. States allow defendants in foreclosures the right to redeem the property within a specified period.
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Tips & Warnings
Consult an attorney if you are not comfortable foreclosing on the property without representation. You may be able to recover the attorney's fees from the defendant.
In a forfeiture, you only demand the amount that the buyer is behind in payments. In a foreclosure, you demand the full balance owed per your contract.
You are not able to resell the property after foreclosure until you regain the property's title.
References
- University of Minnesota Extension; Mortgages and Contracts for Deed; Phillip L. Kunkel et. all
- University of Minnesota Extension; Termination of Contracts for Deed; Phillip L. Kunkel et. all
- Wenzel, Bennett & Kowalski, P.C.; Land Contracts -- Foreclosure Versus Forfeiture; Douglas A. Kowalski; March 1995
- United States Foreclosure Laws: Ohio Foreclosure Law Summary
