What is a land installment contract?
A land installment contract is an agreement for the purchase of land which does not include a mortgage and is expected to be in effect for at least one year. A dwelling must exist upon the land in question. It is an alternative method of purchasing or acquiring real estate. This method is popular during periods of a poor economy, when the purchaser is otherwise unable to obtain traditional financing, and certain estate planning objectives. The deed is retained by the seller and delivered to the buyer only upon payment of the final installment. What should I know regarding a land contract?
A land contract must be in writing, notarized, and contain certain terms required by statute. It must be recorded in the county where the realty is situated in order to protect the buyer against any bona-fide purchasers who may later claim an interest in the realty. Less protection is afforded the buyer in the sense that if he defaults in the rental payments, the seller need only serve a written notice, the contents prescribed by law, that he intends to claim the land as forfeit by the seller. The buyer must make good his payments within thirty days or forfeit the contract. The seller need only request a court to return possession of the land to him through an eviction proceeding, similar to a renter of leased premises. This offers the buyer far less legal protection than if he had a mortgage arrangement for the purchase. However, if the buyer has made payments for a period of five years or more, or equal to twenty percent of the purchase price prior to the default, the seller must pursue a foreclosure and judicial sale of the foreclosed property. If you are planning purchasing/selling realty through a land contract, it is strongly recommended that you seek legal counsel.