Land Contract

A land contract is a seller-financing agreement where the buyer pays for the property in installments and the seller keeps legal title until the balance is paid off.

A land contract — also called a contract for deed or installment sale agreement — is seller financing where the buyer pays in installments but the seller keeps legal title until the contract is paid off. The buyer takes possession, typically covers taxes and insurance, and holds what is called equitable title; the deed itself only changes hands at final payoff or an agreed refinance. Compare that to standard seller financing with a note and mortgage, where the buyer gets the deed at closing and the seller holds a lien the way a bank would.

A hypothetical deal: a seller offers a $90,000 house on a land contract with $5,000 down and monthly payments on the $85,000 balance at an agreed rate, with a balloon payoff in year five. The buyer moves in and pays like an owner; the seller collects income and hands over the deed when the balloon is paid — usually through the buyer refinancing into a conventional loan.

Beginners fall into two traps here. The first is the unrecorded contract: years of payments into a property the public record still shows the seller owning, which leaves the buyer exposed to the seller's liens, creditors, death, or even a second sale. Record the contract or a memorandum of it. The second is assuming the rules are the same everywhere — some states give contract buyers protections close to a mortgage borrower's, while others allow forfeiture clauses where one default can erase everything paid. Close through a title company or attorney who knows your state. This is not legal or tax advice.