A land contract, also called a "Contract for Deed" or "Installment Contract" is a contract made between the buyer and a private seller of a property, wherein the seller holds the deed or title to the property until all the payments are made. The seller remains liable to the mortgage company for all payments. Land contracts are often used by individuals would cannot qualify for a conventional loan or by investors who wish to purchase a property quickly. Any property, which is occupied, unoccupied, improved, unimproved, vacant or commercial, qualifies for sale under a land contract.
Payment Arrangements for a Land Contract
The payment arrangements are subject to the discretion of the seller. However, there is usually a down payment made with monthly payments following until the balance of the loan is paid in full. The contract can include a balloon payment due at the end of the loan. During the length of the contract, the buyer is entitled to possession and equitable title to the property. When full payment has been made, the seller must deliver valid legal title by way of a deed.
All-Inclusive Land Contracts
This is a wrap-around contract, which contains an existing mortgage. The buyer makes one payment to the seller, who in turn makes the mortgage payment to the mortgage company and keeps the difference. The seller can also make extra money if the interest rate he charges to the buyer is higher than the interest rate he pays to the mortgage company.
Straight Land Contracts
This contract can be set up two different ways. The buyer can make one payment to the financial institution and a second to the seller or make one payment to the seller who sends a portion to the mortgage company. The difference, however, is there is no override of interest.
Power of Sale
A power of sale contract involves a buyer, seller and trustee. The right, title, and interest to the property is assigned to the trustee for the purpose of securing the buyer's and seller's obligations. If the buyer stops making payments, the trustee has the right to foreclose on the property.
Acceleration Clause of a Land Contract
A provision of the credit agreement, which allows the lender to demand payment of the total outstanding amount of the loan before it would normally be due under certain circumstances. The lender can also require additional collateral to secure the loan. Such circumstances might include missed payments, failure to pay property taxes on the mortgaged property, non-payment of insurance premiums or bankruptcy.
Tips for Negotiating a Land Contract
The buyer should request an appraisal of the property, obtain title insurance and retain the services of a holding company to retain possession of an executed deed and the original documents. The seller should pull the buyer's credit report, include the buyers name on the insurance policy and hire a disbursement company to handle the collection of payments from the buyer.
Land Contracts: http://www.standardlegal.com/law-library/Land-Contract-Overview.html
What is a Land Contract?: www.wisegeek.com/what-is-a-land-contract.htm
Land Contract Forms: http://kaktus.com/real-estate-forms/forms/land-contract.html
Marie Sberna - Based in northern Ohio, Marie Sberna has been writing for the past 7 years for “Mind, Body & Spirit Magazine“ and NCOC ...
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