The Basics of Land Contract: Real Estate Investing Smart

Land Contracts

Land Contracts

A Land Contract or Agreement for Deed are created through the sale of an existing piece of land or real estate. This would be where the buyer would give the Seller a cash down payment and in turn, the Seller would act as the Bank and finance the balance of the purchase or sale price.

On a Land Contract or Agreement for Deed transaction, the buyer of the property will not have the Deed to the property transferred to him or her until the Land Contract or the Agreement for Deed has been satisfied.

The interest rate and terms will have to be negotiated at the time of sale.

Land Contracts or Agreements for Deed are created on many types of property. Some of those property types would be:

1) Residential (1-4 family)

2) Commercial

3) Mobile Home with Land

4) Land Only

We strongly recommend having the final paperwork of the land contract to be notarized and filed with the county recorders office to protect the buyer to prevent any dishonesty from the seller such as the following.

a) Seller takes out a home equity loan on the property

b) Decides to sell the house to another person

c) Files for bankruptcy protection (if he does make sure he excludes the property)

If the seller has a current mortgage on the house, we recommend financing the property in your name with a lender within two years.

If you have 20% equity at the time that you decide to finance the investment property in your name the lender or Bank would then probably require very little or zero down payment from you to finance the loan.