I am getting started in Ohio but Ohio has very restrictive seller financing laws. Specifically, they do not allow land contract arrangements on vacant land AT ALL. Obviously deed of trust is still an option, but with the default rates being what they are, I am wondering if this is a common strategy? Land contract route is appealing because the title remains in your name and you don't have to go through formal foreclosure proceedings in the event of default....The legal fees with having to undergo foreclosure would make any deal using seller financing in this state needing to be quite profitable to be worth the risk. How do other folks navigate this in similarly restrictive states or do you just go with cash only sales when these limits are present?
@kreisinger87, I ran into something similar doing an owner financed deal in Florida, where you can technically do a land contract / contract for deed, but per their state law (or what I've read and understood about it, anyway), you still need to record that contract with the county (which clouds title), and you have to go through the full foreclosure process in the event of default, even for a land contract. So in effect, if you're following FL's requirement for land contracts properly, you end up with all the downsides of deed of trust / promissory note, but with the added disadvantage of having double the document recording costs (once when you record the land contract, and again once that contract's fulfilled and the deed transfers to your buyer).
Anyway, more to your question, I still moved forward with selling the FL property through a deed of trust / mortgage, because I got all of my total costs for acquiring the property (price paid to seller and all closing costs) plus $100 in cash as a down payment by date of closing. So every month that buyer doesn't default, I'm just further ahead on that property. If they ever do default, the cost of foreclosing in FL may or may not be worth it, relative to the value of the property, but in terms of risk-adjusted expected returns, it still felt worth it to me to proceed with the deal. Now, if I had a cash buyer lined up as well, even at a lower but still acceptable price, I would have gone with that.
So short version, you need to decide your own risk tolerance overall, but one factor to consider would be how much of your own cash you have tied up in the property after receiving your buyer's down payment.