You want to sell a piece of property with a land contract form because you want to avoid the extra expense and paperwork of going through a bank, realtor or mortgage broker. By creating a seller financed land contract form, you eliminate the bank because you as the seller and with the buyer create a land contract form directly between each of you. A land contract is also called a contract for deed. The seller sells the property over time to the buyer collecting interest on the sale amount throughout the life of the transaction.
A land contract between a seller and a buyer keeps the buyer from having to find financing from a bank or mortgage company. Over time the buyer makes payments on the priciple with interest added. When all payments have been made, the buyer takes title of the property. A land contract is a great way for a less than perfect credit buyer to be able to get into a property, avoid rent and build equity in a property. The seller benefits by earning the principl and more money with the interest paid on the property.
When Would You Decide To Use A Land Contract?
As a seller, you decide you want to transact your business without using traditional mortgage financing. As a buyer, you prefer to not use traditional mortgage financing or your credit may not be strong enough to qualify for a mortgage loan. These are situations where you would use a land contract form.
What Is Included In A Land Contract
- Payment Terms
- Total Cost Of The Property
- Down Payment Amount
- Scheduled Paymments
- Installment Amount
- Interest Rate On The Land Contract
- Loan Term
- Balloon Payment If Any
- Who Is Responsibel For Home Repairs
Financing A Land Contract
The buyer makes a down payment. The seller secures the loan using the property as collateral. If the loan goes into default, the seller can foreclose and repossess the property and all payments previously made by the buyer are forfeit.
Differences Between A Mortgage And A Land Contract Agreement
Land contracts are held by the seller offering private financing to the buyer governed by individual state laws. Mortgages are issued through banks and mortgage brokers and are governed by state laws and some federal laws.
When A Land Contract Agreement Is Paid Off
The seller holds the title of the property until the entire loan is paid off. After the loan is paid off, the buyer takes ownership of the property. During the life of the loan, the buyer immdiately has use of the property after the land contract form is signed.
