What is a land contract?


The land contract is a contract between a buyer and seller of a property. It outlines all the things that both parties have agreed upon regarding to the sale, and that when all these conditions are complete, the seller will transfer the ownership (as well as the certificate of title) to the buyer.

The property being referred to in the land contract may either be improved or unimproved. It may already have a structure (such as a home or a commercial building) or it may be vacant.

The land contract also stipulates the payment details - such as whether the buyer is paying in cash or if the property is purchased by installment, how much the down payment will be, as well as the length of the monthly payments. The contract may also specify if a lender is involved who will pay off the seller and will have a separate contract with the buyer.

As a buyer, here are some things you should check:

  • The state laws that relate to sale of the property. Each state has varying laws covering land contracts. You should consult an attorney to help you with this matter, whether you are a seller or a buyer. That way, you can ensure that your interests in the land contract are protected.
  • Ensure that the contract of sale is duly witnessed and recorded. This will help protect your ownership, since you have legal recourse if there is something wrong with the agreement.
  • Check that the property is free of any encumbrances. Make sure that all the mortgages or liens are paid off. If the seller still has to pay the balance of his mortgage, both of you should agree that he will continue payments on the mortgage. This should be put into writing and signed.

The land contract may also be known as an installment sale agreement or a contract for deed.

Other features of a land contract include:

  • The fact that the seller gets to keep the ownership of the property until the seller pays up all that is due. The seller will transfer the ownership once all the payments are settled.
  • The buyer is allowed to occupy the property, even when the property is not yet fully paid off.
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