A 'land contract' (sometimes known as a â€œcontract for deedâ€ or an â€œinstallment sale agreementâ€) is a contract between a seller and buyer of real property in which the seller provides financing to buy the property for an agreed-upon purchase price and the buyer repays the loan in installments. Under a land contract, the seller retains the legal title to the property, while permitting the buyer to take possession of it for most purposes other than legal ownership. The sale price is typically paid in periodic installments, often with a balloon payment at the end to make the timelength of payments shorter than a corresponding fully amortized loan without a final balloon payment. When the full purchase price has been paid including any interest, the seller is obligated to convey legal title to the property to the buyer. An initial down payment from the buyer to the seller is usually also required by a land contract. The legal status of land contracts varies from region to region.
Since a land contract specifies the sale of a specific item of real estate between a seller and buyer, a land contract can be considered a special type of real estate contract. In the usual, more conventional real estate contracts, a seller does not provide a loan to the buyer; the contract either does not specify a loan or includes provisions for a loan from a different "third party" lender, usually a financial institution in practice. When third party lenders are involved, typically a lien called a mortgage or trust deed is placed on the property so that the value of the property is used as collateral until the loan is paid in full.
Also, the purchase price is stated in the agreement as well as the length of time the buyer has to mortgage the property and cash the seller out. Land contracts can only be done on properties that are owned free and clear. If the seller has a mortgage or equity line, there can be no land contract because it would be a violation of the "due on sale" clause and the lender could call in the entire balance of the loan. This is just a general description of a land contrtact but hope it helps to give you a better understanding. Visit me at http://www.kw.com/kw/agent/kathypersha.