If you sold property in Michigan on a land contract, you can sell that contract for cash. You can sell all of it or just part of the payments. This guide covers the Michigan rules that affect your price and how a sale works.
I buy Michigan land contracts. Here's what matters.
Short version: Michigan gives sellers two ways to deal with a buyer who stops paying: forfeiture or foreclosure. Both come with set waiting periods. How much your buyer has paid changes those periods, and that affects your price.
How Michigan land contracts work
On a Michigan land contract, you keep legal title until the buyer pays in full. The buyer moves in, makes payments, and usually pays the taxes and insurance. When the last payment is made, you deliver a deed.
Land contracts are common in Michigan. Courts and buyers know how they work. That helps when you sell.
If the buyer stops paying: forfeiture
Forfeiture means ending the contract and getting the property back. In Michigan, you can only do it if your contract has a forfeiture clause.
- Notice of forfeiture. You serve a written notice that says what's past due. The buyer gets at least 15 days to catch up.
- Court case. If they don't catch up, you file in district court to get possession.
- Redemption time. The buyer still gets time to pay what's owed and keep the home. It's 90 days if they've paid less than 50% of the price. It's 6 months if they've paid 50% or more.
If the buyer stops paying: foreclosure
Foreclosure is the other route. It goes through circuit court. The property is sold at a sheriff's sale, and the buyer usually gets 6 months to redeem after that.
Foreclosure takes longer than forfeiture. It's used most when the buyer has a lot of equity, or when the seller wants a money judgment.
I'm not a lawyer. For legal questions about your contract, talk with a Michigan real estate attorney or check Michigan Legal Help.
Why this affects your price
A note buyer is buying your right to collect. They're also taking on the risk that the payer stops paying. In Michigan, getting the property back takes months, not weeks. A buyer factors that into the price.
The flip side is good news. A payer who has paid for years has real equity. They have a lot to lose, and they rarely walk away.
Michigan details a buyer will check
- Is the contract recorded? Many Michigan sellers record a memorandum of land contract instead of the full contract. Either one works. A buyer will want one of them on record before closing.
- Was the property transfer affidavit filed? Michigan treats a land contract as a transfer. The affidavit goes to the local assessor. It matters for property taxes.
- What's the interest rate? Michigan caps the rate on land contracts. Michigan Legal Help puts it at 11%. A rate over the cap is a problem a buyer will flag.
- Does it have a forfeiture clause? Without one, foreclosure is the only option. That's slower.
- Are taxes current? Unpaid Michigan property taxes can lead to tax foreclosure by the county. I always check this.
What a buyer will check on every deal
I look at three things: the payer, the property, and the paperwork.
- The payer. On-time history, how long they've paid, and whether they live in the home.
- The property. What it's worth, its condition, and whether taxes and insurance are current.
- The paperwork. The signed contract, proof of recording, your closing statement, and any mortgage you still owe on the property.
A contract drawn up by an attorney or title company is worth more than a homemade one.
How the sale works, step by step
- Get a quote. Send the balance, rate, payment, and payment history. Start here.
- Send copies of your papers. See the documents you need to sell a mortgage note.
- Due diligence. The buyer orders a title search and a property value check, then confirms the balance with your payer. Plan on two to three weeks.
- Close. You sign an assignment of your seller's interest in the land contract and a deed to the buyer, subject to the contract. A title company prepares them. You get paid.
- Your payer gets a letter. It tells them where to send payments. Their terms don't change.
Most sales close in about four to five weeks.
What your Michigan land contract is worth
Most land contracts sell for less than the balance, because the buyer pays you today for payments that come in over years. Typical notes sell for about 70% to 85% of the balance. Strong ones can bring more. Thin-equity contracts come in lower.
Try the note value calculator for a rough range. Or get a real quote. Want cash now but still want income later? Read how a partial sale works.
Frequently asked questions
Can I sell a Michigan land contract that was never recorded?
Usually, yes. A memorandum of land contract will need to be recorded as part of the sale. Tell the buyer early.
My buyer is behind. Can I still sell?
Often, yes. The price will be lower, and it will lean more on the property's value. Read can you sell a note if the payer is behind.
Do I need my buyer's permission to sell my land contract?
Usually not. Check your contract for a clause about assigning it. If there is one, show it to the note buyer.
Can I sell just part of my Michigan land contract?
Yes. You sell a set number of payments for cash now. When those are paid, the rest comes back to you.
How long does it take?
Most Michigan land contract sales close in about four to five weeks.
Will I owe taxes when I sell?
You might. Selling usually moves the rest of your deferred gain into this year. Michigan has a state income tax too. Read taxes when you sell an owner-financed note and talk with your CPA.
Selling in another state? See the guides for Ohio and Indiana.
Larry has invested in real estate since 2006 and has bought more than 300 mortgage notes. He runs LJH Investments, LLC, an Ohio company based in Madison, Indiana. More about Larry
This article is general information, not legal or tax advice. Laws change. Talk with your own attorney and tax adviser about your situation.