A real estate contract consists of a document to convey real property and a security device. Real property is land or land and a home as opposed to personal property, such as a car, dining room table or computer. The buyer of real property has the right to occupy the property but also has an obligation to make regular payments of the purchase price to the seller assuming the buyer did not pay in full upfront for the real property and not many of us can just write a check for our next home. The land sale contract conveys a promise to pay and the security of payment by the trust deed or mortgage on the home/land.
Usually, after the buyer and seller signed the contract, the buyer makes a down payment against the purchase price to the seller and the buyer receives possession of the home/land. The buyer then pays the balance of the purchase price to the seller, plus interest, over time, which is determined in the contract, most often in monthly installments.
While the monthly payments are still being made, the seller typically holds legal title to the property. This is the “security device” mentioned above and is how the seller secures the buyer’s obligation to make the contract payments. During this time period, the buyer does have an equitable interest in the home. Under Oregon law, it is standard that the buyer’s equitable interest entitles the buyer to possession of the property and the right to receive rents and profits which might be generated from the property. For example, if the buyer rents the property out then the buyer gets the rent money and not the seller. Note, this can be different if the land sales contract states otherwise, so it is important to know exactly what the contract allows when purchasing a home or land. Usually, the seller will hold the property deed until the last payment is made by the buyer, at which time the legal title is transferred to the buyer in the form of a fulfillment deed. Until this time however, for most purposes, in Oregon the buyer is treated as the equivalent of the property owner, and the seller is treated as a secured lender.
Real estate contracts are the preferred means of sellers to sell real property because of the default options if the buyer fails to make payments and foreclosure procedures begin but a real estate contract is not the only means to buy and sell real property. Whether you are a buyer or seller or need assistance with foreclosure, feel free to contact our office and we will be happy to assist you.
Scott C. Bucy is an attorney with the Law Office of Robert Good LLC, specializing in estate planning, business, landlord-tenant and contract law. Contact him at (541) 482-3763.