Are land contracts valid without an amortization table?

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Are land contracts valid without an amortization table?

We signed an agreement to sell real estate contract 2 months ago. It was intended to be a land contract and we gave the sellers $3,300 in ernest money. We were paying the mortgage and property taxes. Our agreement says that our payments are due on the 1st of each month. Nowhere in the agreement does it say how much of our monthly payment goes towards the price of the house. Also, the seller recently gave us a cure or quit letter stating that we owe late fees and if we don’t pay them our contract is void and they keep the ernestmoney. Yert late fees were not included in the contract. Since the contract does not address late fees, who voids the contract?

Asked on July 14, 2011 under Real Estate Law, Wisconsin

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

The answer to your question is no. You are confusing a purchase contract to buy land with a contract to obtain a loan to get the money to purchase the land. They are two different things.

Typically, people enter into a contract with the seller of property to buy land where money is transferred to the seller by the buyer and in exchange, title to the property is then placed in the buyer's name. Sometimes the sale is an all cash deal by the buyer, most of the time the sale requires some cash of the buyer and a loan usually by a financial institution.

When a loan from a financial institution is acquired, there is a second contract that the buyer enters into with the financial institution to get the loan set forth in a loan agreement where a promissory note and a mortgage is signed as security for the dollar amount of the loan.

The amount of the loan can have a fixed rate for pay off over time or be a variable rate (fluctuating rate).

In your situation, it sounds that the seller made you a loan directly for the purchase as opposed to an institutional lender. If so, you need to look at the purchase agreement, the promissory note or notes you signed and the mortgage to see what the monthly payments are and the years the payments are to be made. From that, you can create an amortization table. There are computer programs for this.

By looking at the total amount of the promissory note, its interest rate and years of payment, you can calculate how much of the monthly payments are applied to principle and interest.

All loans apply initially more of the monthly payments to interest than principle on the obligation, but as time passes and the principle is reduced, more principle is then paid on the loan and less interest.


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