How Can I Sell My Business in a Land Contract?

If you are interested in selling business property as part of a land contract, you can prepare to do so relatively easily by ensuring that you complete a few critical steps along the way. Although the risks associated with the land contract are yours to assess, establishing a viable contract can often be accomplished without too many difficulties along the way.

Preparing an Appraisal

Land contracts act as a convenient transaction method for buyers and sellers who wish to exchange property without the intervention of a bank or other financial institution. In exchange for the degree of freedom offered by land contracts, bank financing is typically unavailable. With that in mind, it is not uncommon for buyers seeking land contracts to have a history of poor credit or other financial troubles that may make it impossible for them to secure financing from a major lender. However, this is certainly not always the case. For many individuals, a land contract simply acts as a streamlined and expedited approach to a major transaction.

Perhaps the most important step you must take when preparing a land contract sale is to gain a professional appraisal of the value of your business. This would typically be considered an integral (and early) step within the sale process for major banks and financial institutions. Fortunately, you can hire a professional appraiser who will be able to assess the strength of your assets and determine what a suitable sale price may be. Keep in mind that business appraisers are often distinct from real estate appraisers. In order to establish as much legitimacy as possible for your land contract, you will need to make sure these foundational steps provide well-researched, accurate results.

Creating the Buyer Application

If you have located a potential buyer for your business, the next step is to ensure that you have all relevant documentation, contact information and identification for them. Templates for such applications are widely available online, but as a general rule, you should simply try to ensure that you have the information you need to assess the buyer's financial health, their ability to pay for the property and a history of successful transactions or conduct as evidenced by personal references. It is in your best interest to review all of this information thoroughly so as to make sure that your buyer will not cause additional headaches for you over time.

Finalize a Contract

At this point in the process, it is in your best interest to hire an attorney who can help you create a legally binding contract for selling a business with real estate. Buying a business on land contract is a significant undertaking, and should be supported as much as possible by qualified legal experts who will help ensure that all elements of the sale comply with state and federal laws. Although you can choose to forego this step, it will likely not be in your best interest. With a land contract, commercial property can be bought and sold to whatever extent you choose. However, the success of this sale will depend largely on the stable contractual and legal foundation on which it is built.

Receiving Your Payment

After initiating the land contract, the seller of the property will often receive the payment due to them directly from the buyer, either as a lump sum or in installments. The seller can establish specific repayment terms in the land contract, which also include any requirements such as down payment and interest rates on financing. Although less common, some buyers may still choose to seek traditional bank financing.

If you have any questions about land contracts and the buying / selling process, it is in your best interest to consult with a legal expert prior to querying buyers. Understanding the fine details of this process is absolutely critical for ensuring a smooth and successful sale.