| A land contract is an agreement between a buyer and | | | | The use of these contracts help investors sell |
| a seller. Instead of selling a property outright, a real | | | | properties in a weak market, particularly because land |
| estate investor "contracts" the property to a buyer. | | | | contract homes' fees are lower. |
| The seller provides financing for the buyer at a | | | | Requirements For Land Contract Buyers |
| pre-arranged price. The buyer pays back the "loan" in | | | | The title can only be transferred after payments are |
| installments. You can use land contracts to buy or sell | | | | paid in full. |
| properties. | | | | While the property is under contact, the buyer must |
| Selling A Home Using Land Contracts | | | | make all payments. Although payments are set |
| With this type of instrument, the seller holds the deed | | | | between the buyer and seller, they are typically set |
| to a property until the buyer pays for the loan in full. A | | | | using a mortgage amortization schedule. |
| land contract doesn't involve banks or traditional | | | | Legally, the seller is allowed to stay in the home as |
| mortgage lenders. There are no credit requirements or | | | | long as they are not in default. At the end of the |
| rigid financing rules. For sellers with credit challenges, | | | | contract, the buyer would typically make a balloon |
| this alone can be worth it, because the price of the | | | | payment and then own the property outright. |
| home may be less expensive than a traditional | | | | If the buyer defaults, the seller can repossess the |
| mortgage. | | | | property. The buyer would lose payments and equity |
| Land options also offer benefits for investors: The | | | | gained during the duration of the contract. By law, the |
| seller of the contract can charge a higher sale price | | | | seller would not be required to transfer the deed to the |
| than if the property is sold with traditional bank | | | | buyer. |
| financing. The seller doesn't have to pay a down | | | | Check the laws in your state. These contracts vary |
| payment, so the real estate investor can command a | | | | by state. They are a popular tool in states such as |
| higher purchase price and a higher interest rate for | | | | Michigan, but some states do not have favorable land |
| more profit. | | | | contract laws. |