Land Contract Forms – What is a Land Contract?
Land Contract Forms - What is a Land Contract?
A land contract is one between the buyer and the seller of a property, and the seller holds the title until the purchase price is paid in full. Because laws differ from one state to another, people should consult an attorney before they enter into a land contract. The property in question can be improved, vacant, or a business building, or even a home. Most land contracts begin with a down payment, with equal monthly payments and sometimes a balloon payment at the end. A balloon payment is a larger sum that must be paid at a designated time. A land contract is comparable to a lease option or paying rent, although they are not in fact the same. A land contract is different because the agreement is filed with the courts and is binding, and it also gives the buyer the option to complete purchase at a preset time during the loan’s term. At that point, any payments made beforehand become the buyer’s equity. In most places it’s legally required that land contracts forms be recorded, leaving the buyer with little to no legal recourse if the agreement is inaccurate. If the seller still owes on a mortgage, the buyer usually enters into the agreement with the assumption that the seller will take the money that they pay and apply it to the mortgage and any taxes (keeping the title clear). If this happens, the buyer gets the title at the end of the contract term, but if the seller fails to make payments, there will be problems for the buyer. That’s why land contracts need to be in writing. A land contract can seem like a smart choice for a buyer that cannot get a regular loan, but there are a few disadvantages. Most sellers don’t file the correct paperwork, in some cases because their lender wouldn’t allow them to sublease. The lender can stipulate that the borrower must keep the property, and trying to circumvent that agreement by not filing a land contract can present legal problems for both the original buyer and the new one. | |