A land contract is an alternate path to land ownership that doesn’t involve a mortgage or promissory note. With land contracts, a buyer purchases the land through installment payments directly to the vendor. The buyer otherwise uses the land according to the details of the land contract or occupies.
No Mortgage Qualification
1 benefit for the buyer on a land contract is the buyer doesn’t have to meet the strict credit standards necessary for traditional home mortgage acceptance. Standard Legal, a company that offers legal advice to laypeople, suggests that land contracts are ideal for people who are capable of monthly payments but do not have the available money or credit score to make a down payment for a traditional mortgage.
Income
In a tight market using a hard-to-sell property and stringent credit scores necessary for traditional mortgages, land contracts are an attractive option for landowners who want to sell their home. A land contract with a trustworthy buyer gives the seller consistent, dependable income. American Legal Review notes in addition to the actual value of the home, the seller also receives interest on the principal amount.
Few Buyer Protections
Buyers in land contract agreements are in the mercy of the details of local laws and the land contract. According to Mortgageloan.com, the vendor typically retains the title to the property before the land is fully repaid, which means that missing one payment could entitle the vendor to take back possession of their property and maintain all preceding payments. With a traditional mortgage, a lengthy foreclosure procedure would be triggered by overlooking payments.
Property Care
Because the sellers in land contracts usually retain the title for the duration of the agreement, any ordinance violations due to the buyer could be the responsibility of the seller. If the contract gets the vendor as the taxpayer, violations such as tall grass or an illegal drive are placed beneath the seller’s name. In that circumstance, the vendor is finally responsible for rectifying the condition causing the violation.