Land Contract Transactions

Land Contract Transactions

A land contract is an agreement for the sale of an interest in real estate in which the purchase price is to be paid in installments, and no promissory note or mortgage is involved between the seller and buyer. Land contracts can be a very good option in a real estate transaction when a buyer cannot obtain traditional financing through a bank or other lender.

A land contract transaction involves a form of financing from the seller of the property where the seller accepts a down payment, monthly payments and interest over a given period. Usually there is also a “balloon” payment after a specified period of time, when the final balance is due in full. After the balance of the land contract is paid, legal title is then transferred to the buyer.

There is no legal requirement to use the services of an attorney for a land contract. However, failing to do so means you may wind up with a land contract that doesn’t protect your interests or is silent on important issues, such as deed filing, transfer of title, transfer taxes, forfeiture and foreclosure.   

Although land contract forms may provide generic fill-in-the-blank pages, the forms may not be tailored to your specific situation and needs. It is always a good idea to check with an experienced attorney to make sure a land contract protects your interests.

Bill Ager has many years of experience with drafting and reviewing land contracts. He strives to reduce real estate expenses while providing thorough and customized services for his clients. Reasonable flat fees are available for Bill’s services.

Contact Bill Ager at (734) 649-0784 or at bill@agerlawoffice.com for more details on reasonable flat fees for these services.

FREQUENTLY ASKED QUESTIONS

Can I sell my property using a land contract even though I have a mortgage?

Yes but you must be very careful. All mortgages have a “due on sale” clause, and because a land contract is a sale as defined by most mortgages, you would be obligated to pay off the entire balance of your mortgage after entering into a land contract.  

One way to deal with the “due on sale” clause is to let your bank or lender know what you are doing and obtain their assurance in writing that they will not call the balance due.

Many people do not ask the bank for permission, and simply hope that the bank will not find out about the land contract or will just let it go, This is very risky. There are ways of dealing with a “due on sale” issue; an experienced attorney can properly advise you.

How can I make sure I get the deed for the property after I have paid the balance of land contract?

Usually, a title company is involved in the transaction, because the buyer will want a title insurance policy that guarantees he is receiving marketable title with no liens on the property.

At the closing, the seller should sign the deed and ask the title company to hold it in an escrow account. Under the terms of the escrow account, the deed will not be delivered until the title company confirms the balance of the land contract has been paid off. This can be done by either the seller confirming the payoff or the buyer providing documentation that all payments have been made.

About Bill

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Born and raised in Ann Arbor, Michigan, Bill Ager graduated from the University of Michigan and then served in the U.S. Army. He graduated from the Defense Language Institute and worked at the Army’s Freedom of Information Center in Washington…

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