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Land Contract

Definition

A land contract — often described by other terminology listed below — is a contract between the buyer and seller of real property in which the seller provides the buyer financing in the purchase, and the buyer repays the resulting 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 in the corresponding fully amortized loan. When the full purchase price has been paid including any interest, the seller is obligated to convey legal title to the property. An initial down payment from the buyer to the seller is usually also required.

What is 'Land Contract'

An agreement between a buyer and seller of property in which the buyer makes payments toward full ownership (as with a mortgage), but in a land contract, the title or deed is held by the owner until the full payment is made. This type of contract is technically not a legally binding agreement and, therefore, many different types of payment formats can be found.

As in a standard mortgage, there is an agreed upon price and payment schedule, but the payments are often not amortized evenly, so that a large balloon payment may be required to complete the purchase. Also known as an installment purchase contract or an installment sale agreement.

Explaining 'Land Contract'

A land contract can be thought of as a "lease with an option to buy". Certain states have more generous legal rights for land contract holders than others. As a result, the world of land contracts can be difficult to navigate. As such, a land contract buyer must be very careful to ensure that the terms of the contract are legally binding in case a dispute arises in the future.

Land contracts are often used by purchasers that would not otherwise qualify for a mortgage, or by investors who wish to complete a purchase faster than a regular mortgage would allow.


Further Reading


Analysis on the Flow of the Rural Land Contract Right in Terms of Institutional Economics [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-SWYJ200701002.htm'>PDF]
… and Law,Wuhan,Hubei 430073,China);Thinking of the System of Contract Period of … of Transaction Costs[J];The Theory and Practice of Finance and Economics;2004-05 … Agricultural University,Baoding 071001,China);Status and Countermeasures of Rural Land Transfer in …

The Installment Land Contract--A National ViewpointThe Installment Land Contract--A National Viewpoint
heinonline.org [PDF]
… and Law,Wuhan,Hubei 430073,China);Thinking of the System of Contract Period of … of Transaction Costs[J];The Theory and Practice of Finance and Economics;2004-05 … Agricultural University,Baoding 071001,China);Status and Countermeasures of Rural Land Transfer in …

A Discrimination of the Subject of the Land Contract Operation Right <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-ADZS200704023.htm' />A Discrimination of the Subject of the Land Contract Operation Right [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-ADZS200704023.htm'>PDF]
… and Law,Wuhan,Hubei 430073,China);Thinking of the System of Contract Period of … of Transaction Costs[J];The Theory and Practice of Finance and Economics;2004-05 … Agricultural University,Baoding 071001,China);Status and Countermeasures of Rural Land Transfer in …

On the Fragment and Rebuilding of the Property Rights of Management in China Rural Land Contract <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-JHKX200202009.htm' />On the Fragment and Rebuilding of the Property Rights of Management in China Rural Land Contract [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-JHKX200202009.htm'>PDF]
… and Law,Wuhan,Hubei 430073,China);Thinking of the System of Contract Period of … of Transaction Costs[J];The Theory and Practice of Finance and Economics;2004-05 … Agricultural University,Baoding 071001,China);Status and Countermeasures of Rural Land Transfer in …

The Analysis Influential Factors and Potential Willingness of Financial Institutions on Land Contract Right Mortgage Loan: Based on a Survey of Rural Loan Officer <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-NJWT201307011.htm' />The Analysis Influential Factors and Potential Willingness of Financial Institutions on Land Contract Right Mortgage Loan: Based on a Survey of Rural Loan Officer [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-NJWT201307011.htm'>PDF]
… and Law,Wuhan,Hubei 430073,China);Thinking of the System of Contract Period of … of Transaction Costs[J];The Theory and Practice of Finance and Economics;2004-05 … Agricultural University,Baoding 071001,China);Status and Countermeasures of Rural Land Transfer in …

Mortgage of Land Contract Management Right According to the Power and Functions of Rights of Contract for Management of Land <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-GDTD201102006.htm' />Mortgage of Land Contract Management Right According to the Power and Functions of Rights of Contract for Management of Land [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-GDTD201102006.htm'>PDF]
… and Law,Wuhan,Hubei 430073,China);Thinking of the System of Contract Period of … of Transaction Costs[J];The Theory and Practice of Finance and Economics;2004-05 … Agricultural University,Baoding 071001,China);Status and Countermeasures of Rural Land Transfer in …

The Land Empowerment and the Forms of Pooling of the Land Contract Right <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-REFO201102017.htm' />The Land Empowerment and the Forms of Pooling of the Land Contract Right [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-REFO201102017.htm'>PDF]
… and Law,Wuhan,Hubei 430073,China);Thinking of the System of Contract Period of … of Transaction Costs[J];The Theory and Practice of Finance and Economics;2004-05 … Agricultural University,Baoding 071001,China);Status and Countermeasures of Rural Land Transfer in …

Heterogeneous risk preferences, discount rates and land contract choice in EthiopiaHeterogeneous risk preferences, discount rates and land contract choice in Ethiopia
onlinelibrary.wiley.com [PDF]
… and Law,Wuhan,Hubei 430073,China);Thinking of the System of Contract Period of … of Transaction Costs[J];The Theory and Practice of Finance and Economics;2004-05 … Agricultural University,Baoding 071001,China);Status and Countermeasures of Rural Land Transfer in …