A Land Contract is an agreement between the buyer and seller. No bank is involved. The buyer is required to give the seller a down payment and the remaining balance is paid in monthly installments. Seller and buyer agree on purchase price, down payments, terms (years/months), interest rate, who pays taxes and insurance. Because the seller still holds title until the balance is paid, some sellers may opt to pay the taxes and insurance themselves to ensure the payment is made. However, some sellers may let the buyers pay those on their behalf, it is totally what the seller and buyer agree on. A land contract can be especially beneficial to buyers with less than stellar credit, because their credit score is not a factor! It is also beneficial to a seller to gain occupancy in their property that may have gone vacant waiting for a loan qualified buyer. It is also great way for sellers to compete with the low prices of the foreclosed homes. A buyer may not have enough cash to purchase an REO foreclosure outright, but may have enough for a down payment on a land contract. It can be a win-win situation for all.
A I Realty