A land contract is a way of selling real estate in installments where the seller keeps the deed until the buyer has paid the full price. The buyer moves in and makes payments, and the seller stays the owner on paper until the last one.
Who holds what while the payments run
You agree on a price with the buyer. They pay a down payment and sign a contract promising the rest in monthly installments at a stated interest rate. From that day they have possession, so they can live on the property or use it, and the contract normally makes them responsible for taxes, insurance and upkeep.
The deed stays with you. You keep what is called legal title, and the buyer holds equitable title, the right to become the full owner by finishing the payments. When the last payment arrives, you sign and deliver the deed.
A standard seller-financed sale uses a promissory note and a mortgage. A land contract folds both into one document that contains the promise to pay and the terms that protect the seller, and most of how a contract for deed differs from a mortgage follows from that.
Names it goes by
The name changes by region, and your paperwork may carry any of these:
- Contract for deed
- Installment land contract or installment sale contract
- Agreement for deed
- Real estate contract
- Bond for deed
All describe the same basic arrangement, though state law treats them differently in the details.
Where land contracts get used
They turn up where a bank loan is hard to get: rural land, lower-priced houses, properties needing repair, and buyers who are self-employed or have thin credit. The seller gets a sale and an income, and the buyer gets a path to ownership without a bank. Sellers also like keeping the deed, which feels safer than handing it over and taking back a mortgage, although whether it really is safer depends on the state.
If the buyer stops paying
Here land contracts part ways with mortgages, and state law varies widely. In some states a seller can end the contract and keep both the property and the payments made so far, a remedy called forfeiture. In others, courts or statutes require something closer to a foreclosure, especially once the buyer has paid a meaningful share of the price, and the buyer may have a right to catch up first.
If your buyer is behind, talk to an attorney in the state where the property sits before you send any notice, since whether foreclosure or forfeiture applies is a matter of that state’s law.
Reading your own contract
- Was it recorded? Some contracts, or a short memorandum of them, are filed with the county. Recording protects both sides and makes a later sale simpler.
- Is there a loan on the property? If you still owe a lender, your buyer’s interest sits behind that loan.
- Who pays taxes and insurance? Confirm that it is happening, since the tax bill may still come to you as owner of record.
- Do you have payment records? A ledger backed by bank deposits is what anyone reviewing the contract will ask to see.
Those answers, with the balance, the rate and the payment, are what the note pricing form asks for if you want to know what the contract would sell for.
Selling the payments
The payments owed to you under a land contract can be sold for a lump sum, as the payments on other types of note can. Because you still hold title, the paperwork has an extra step: you assign your interest in the contract to the note buyer and also deed them your interest in the property, so that they can deliver the deed when the contract is paid off. Whether part of the payments can be sold, leaving the rest with you, depends on the contract and its payment record.
Land contracts are a specialty among note buyers, so offers when you sell a land contract can differ widely. When two offers are far apart, ask each buyer what they assumed about title and recording before you read the gap as one of them being generous.
Related questions
Is a land contract only used for vacant land?
No. Despite the name, it is used for houses, mobile homes with land, farms and commercial buildings as well as bare land. The word land refers to real estate in general.
Who owns the property during a land contract?
The seller holds legal title, meaning their name is on the deed. The buyer holds equitable title, meaning the right to receive the deed once the contract is paid. Both have real interests in the property.
Does the buyer on my land contract have to agree before I sell it?
The contract itself governs. Where nothing in it limits a transfer, the buyer's terms stay the same and they are told where to send payments. We read the contract for any clause that does limit one.