Land Contract: Definition, Benefits, Risks
Jump to Section
Quick Facts — Land Contract Lawyers
- Avg cost to draft a Land Contract: $500.00
- Avg cost to review a Land Contract: $410.00
- Lawyers available: 112 real estate lawyers
- Clients helped: 199 recent land contract projects
- Avg lawyer rating: 4.94 (12 reviews)
What Is A Land Contract?
A land contract, also called a land contract agreement or purchase and sale agreement, is a legally-binding document used in the purchase of land, whether vacant or occupied by existing buildings or homes. It is a type of seller financing. Unlike a mortgage, the purchaser makes payments to the seller until the balance is paid in full.
If you need help drafting a land contract, it is best to speak with real estate lawyers. They can provide legal advice and guidance throughout the process.
Learn more about land contracts by checking out this article.
How Land Contracts Work
Under a land contract agreement, the buyer typically agrees to make a down payment and a promise to make periodic, routine payments on the balance’s remainder with interest. Depending upon the agreement, the monthly payment, term length, and interest rate can vary widely.
It is essential for buyers to keep in mind that they do not legally hold the property title until the balance is paid in full. They hold a deed of trust or equitable title to live on site or develop the property through a ground lease in the interim.
These are the steps involved with buying a property with land contracts:
- Step #1: The property owner agrees to sell and finance a property to a buyer.
- Step #2: The property owner works with real estate lawyers to draft a land contract.
- Step #3: The parties may collectively negotiate the terms and conditions of the land contract.
- Step #3: The property owner keeps the property titles and provides the buyer with a deed of trust.
- Step #4: The buyer continues to make payments according to the terms and conditions of the land contract.
- Step #5: The property owner and buyer clear the title from any applicable mortgages.
- Step #6: The property owner titles the deed over to the buyer when the balance is paid in full.
- Step #7: Both parties should retain documentation of the transaction for at least 7 years following it.
Some U.S. states use land contracts more often than others do. Both parties are encouraged to carefully consider the terms and conditions of the deal with property lawyers. Doing so may help you avoid future disputes and misunderstandings, primarily when you use a land contract agreement.
Here is an article about how a land contract works.
CC verified
Typical Terms in a Land Contract
While the typical terms in a land contract can be reasonably standardized, it is critical that you have real estate lawyers complete a contract review before signing it. This strategy helps you avoid legal mistakes and common pitfalls. Doing so can also help you save money in the long run by avoiding disputes.
These are the typical terms in a land contract:
- Name and address of all parties
- A description of the property
- Acknowledgement of the person who owns the property
- Describe easements on the property
- Include land contract limitations
- Reference any liens on the property
- Provide the property’s terms of use
- Determine the terms of payment
- Assign an interest rate with a land contract calculator
- Ascribe how to handle late payments
- Identify a contract start and end date
- Assign party responsibilities and obligations
- Clarify the terms of the insurance
- Set the terms for transferring the property ownership
- Include warranties and guarantees
- Assert your right to acceleration
- Insert state-specific clauses and terms
- Provide a blank signature and dateline
After legally drafting your document, you can then arrange for a final signing with the buyer. Once signed, take a scan or photograph of the document, and disseminate copies to all relevant parties. You can also make hard photocopies that you can reference later in case disputes arise in the future.
Check out this article later for more information about the terms of a land contract.
Advantages of A Land Contract
Since a land contract is an alternative form of financing, there are advantages and disadvantages of using them. A traditional lender is not involved, which means that the buyer and seller should consider the terms carefully.
The advantages of a land contract include:
- Advantage #1: There is no involvement of a traditional lender
- Advantage #2: The seller gets to flexibly establish the terms and conditions of the sale
- Advantage #3: The buyer can close immediately and counter with terms and conditions to the seller
- Advantage #4: There are no lender requirements, which means that the closing costs are less under a land contract
- Advantage #5: There are tax and income benefits for both the buyer and seller
As you can see, there are distinct advantages of land contracts. However, there are disadvantages that buyers and sellers should also consider. These risks may outweigh the reward depending upon your situation.
Image via Pexels by Pixabay
Disadvantages of a Land Contract
The most significant disadvantage of a land contract is the amount of risk both parties take on. Therefore, it is critical for buyers to carefully select sellers and vice versa. Any concerns should be taken up with property lawyers in your state.
The disadvantages of a land contract include:
- Disadvantage #1: The title does not automatically pass to the purchaser in a land contract
- Disadvantage #2: The seller could be held legally responsible for inspection issues with local or state authorities
- Disadvantage #3: Forfeiture of a land contract by the purchaser is a fairly common occurrence
- Disadvantage #4: It can take several months for the seller to resume control of the property in case of buyer forfeiture
- Disadvantage #5: An existing mortgage supersedes a land contract, which can create problems for the buyer
If you are considering or contemplating buying or selling land through a land contract, real estate lawyers can help you draft a land contract agreement that sets clear guidelines and terms. They can also answer legal questions throughout the entire process.
Land Contract Template
100% Lawyer Drafted
100% Lawyer Drafted
Getting Help With A Land Contract
Whether you are facing a complicated or straightforward land contract deal, it is a wise choice to hire property lawyers to draft the agreement. Problems can arise at any given point. You will want to have an experienced legal professional on your side to help prevent them.
These are the ways that property lawyers can help you with getting a land contract:
- Offering professional contract reviews for fairness and compliance
- Providing legal advice when dealing with complicated land contract issues
- Assisting sellers when dealing with liens and title searches
- Handling a proper and lawful closing for both sides
- Contract negotiation for the conditions and terms of the land contract
- Preparing a closing statement for both parties
Property lawyers offer valuable advice and assistance when purchasing land or property through a land contract. They can also handle pressing questions related to costs or disputes.
If you choose to forgo your opportunity to work with property lawyers, it could result in future legal mistakes with negative ramifications. Avoid this critical mistake by hiring legal representation early on in the process.
Need Legal Help From Property Lawyers?
ContractsCounsel connects you directly with property lawyers in your state. Post your project for free and begin receiving proposals.
See Real Land Contract Projects
California Contract to Split Proceeds of Future Home Sale Drafting
- California
- 2 lawyer bids
- $425 - $950
See all Land Contract projects
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
Need help with a Land Contract?
Meet some of our Land Contract Lawyers
Jeffrey K.
I've been a Real Estate attorney for over 25 years. I handle real estate transactions, commercial collections, foreclosures, replevins, landlord tenant issues and small business matter.
"Jeff is a great attorney to work with. Very responsive and excellent attention to detail. Excellent quality of work with actionable next steps and insightful suggestions for consideration."
Jane C.
Skilled in the details of complex corporate transactions, I have 15 years experience working with entrepreneurs and businesses to plan and grow for the future. Clients trust me because of the practical guided advice I provide. No deal is too small or complex for me to handle.
"Jane was great to work with. She was responsive, thorough, and made every revision I requested without any issues. She took the time to ensure the agreement reflected exactly what I wanted and was very knowledgeable throughout the process. I appreciate all of her hard work and would definitely recommend her to anyone looking for quality legal drafting services."
Matthew S.
I am a 1984 graduate of the Benjamin N Cardozo School of Law (Yeshiva University) and have been licensed in New Jersey for over 35 years. I have extensive experience in negotiating real estate, business contracts, and loan agreements. Depending on your needs I can work remotely or face-to-face. I offer prompt and courteous service and can tailor a contract and process to meet your needs.
"Matthew was prompt and professional and satisfied all requirements of my request!"
Odini G.
I am an accomplished attorney with more than 19 years of experience and extensive expertise in business negotiations, commercial contracts, and technology transactions. With a proven track record of providing strategic legal advice and delivering exceptional results, I have successfully assisted numerous clients in drafting, reviewing, and negotiating various business arrangements. My experience encompasses a wide range of areas, including intellectual property, data privacy and security, SaaS agreements, and software licenses. I co-founded a reputable general corporate law firm with three offices in Aspen, Atlanta, and New York. As a partner and attorney, I represented diverse clients, including start-ups, public corporations, investors, financial institutions, educational institutions, and non-profit entities. With a focus on delivering comprehensive legal solutions, I provided general counsel, expert dispute resolution, efficient litigation management, and skillful contract drafting and negotiations for businesses across industries.
"Supremely responsive and works surprisingly quickly. Strongly recommend!"
Benjamin E.
Benjamin is an attorney specializing in Business, Intellectual Property, Employment and Real Estate.
"Benjamin E was very easy to work with and would recommend him."
Gamal H.
I am a commercial contracts attorney with twenty years of experience. I have represented major corporate clients including Amazon, Marvel, and Viacom as well as independent entertainment professionals and technology startups.
"Gamal has been a pleasure to work with. This book is the first in a 4-book series and I will certainly retain him for all of them should the publisher wish to exercise that option. Well done!"
October 28, 2021
Rachael D.
We help simplify every transaction and provide a superior level of customer service to create long lasting and trusted relationships with our clients. Our goal is to guide our clients with practical and zealous legal representation and eliminate the difficult nature of any legal transaction.
Find the best lawyer for your project
Browse Lawyers NowLawyer Reviews for Land Contract Projects
Road Agreement Addendum
"He educated and did a through job with making sure that all the bases were covered in the contract reviewed. I do hope to work with again."
ContractsCounsel User
Land Contract Drafting
"Very informative and helpful throughout the process."
ContractsCounsel User
Contract for Deed for deal between family
"Great to work with."
ContractsCounsel User
Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.
View Trustpilot ReviewNeed help with a Land Contract?
Real Estate lawyers by top cities
- Austin Real Estate Lawyers
- Boston Real Estate Lawyers
- Chicago Real Estate Lawyers
- Dallas Real Estate Lawyers
- Denver Real Estate Lawyers
- Houston Real Estate Lawyers
- Los Angeles Real Estate Lawyers
- New York Real Estate Lawyers
- Phoenix Real Estate Lawyers
- San Diego Real Estate Lawyers
- Tampa Real Estate Lawyers
Land Contract lawyers by city
- Austin Land Contract Lawyers
- Boston Land Contract Lawyers
- Chicago Land Contract Lawyers
- Dallas Land Contract Lawyers
- Denver Land Contract Lawyers
- Houston Land Contract Lawyers
- Los Angeles Land Contract Lawyers
- New York Land Contract Lawyers
- Phoenix Land Contract Lawyers
- San Diego Land Contract Lawyers
- Tampa Land Contract Lawyers
ContractsCounsel User
Contract template
Location: Florida
Turnaround: Over a week
Service: Drafting
Doc Type: Land Contract
Number of Bids: 3
Bid Range: $550 - $1,500
ContractsCounsel User