A land contract form transfers property ownership from a seller to a buyer. The seller allows the buyer to take possession of the property while using it as collateral for the loan. When the buyer pays off the loan, he receives full title to the property. If a land contract form is not transferred, then the buyer will be considered a tenant-at-will, which means he owns all of the property’s improvements but none of the land or structures. Land contracts are heavily regulated, and both parties should look at several different forms before deciding which one best suits their needs.
What is a land contract form?
A land contract form is a legal document that literary binds two parties together. Like with the forms designed for drawing up basic contracts, this one comprises several clauses and definitions. These clauses pertain to the seller and buyer, their property rights, and each party’s responsibilities concerning the agreement. A land contract usually has a specific termination date – or a date when the buyer will be fully responsible for the purchased property. It usually takes place near a particular location – or simply anywhere within a particular jurisdiction.
How does a land contract work?
A land contract is a contract to transfer land. In the agreement, buyers and sellers must agree on various terms. Buyers and sellers must also agree on many other details.
Buying a property by utilizing a land contract allows potential buyers to escape the strict requirements that banks impose on mortgage applicants. Some people who have credit problems can benefit from purchasing a home through this kind of contract.
When they can get approval from the owner, they can enjoy lower interests, flexible payments, and smaller down payments than a home loan. It’s also easier to get these contracts approved since there are no financial documents involved, and only one signature is needed in most cases.
In real estate, it generally takes three steps to complete property transfer from seller to the buyer. The first step is when the seller accepts the buyer’s offer to purchase. The second step is when all of the terms and conditions have been completely satisfied — especially the payment terms over the specified period of time — and the property’s legal title then gets transferred by the seller to the buyer via some kind of deed like a warranty deed. The third and final step is when both parties’ names are put on the new deed.
A potential purchaser, who currently owns a construction loan, can easily avail of the purchase money mortgage loan. The new buyer receives an equitable title of the property once he makes the payment to the seller. This means that the holder owns a legal interest in the property while the seller has been precluded by law from offering it to anyone else.
Under the law, legal title is one of the main reasons why a seller is precluded from taking the property back following a lender’s pre-approved land contract. This means that only the seller is officially allowed to pay off debts on behalf of his property, even if this means having to mortgage it.
After the buyer has made the last payment and all of the conditions in the land contract have been completely fulfilled, the property’s deed gets filed with the register of deeds.
What are the land contract types?
Installment Sale Land Contract
In this type of agreement, no money is paid until the final payment is received. If a buyer purchases a piece of property financed with an installment land sale contract, they will have to pay monthly payments over time until the purchase price has been completely paid off.
Wraparound or All-Inclusive Land Contract
Banks and financial institutions give loans to homeowners who can’t afford or don’t want or don’t qualify for a mortgage of the property being sold. This allows buyers to take ownership of a home with a property mortgage but with a lower monthly payment. A wraparound land contract is one type of refinancing that comes into play when a new mortgage for a buyer gets wrapped around an already existing mortgage that a seller still holds.
Straight Land Contract
Straight land contracts are also called “mirror wrap” agreements since the buyer’s existing mortgage “mirrors” the seller’s existing mortgage. The difference between a straight land contract and a standard sales contract is that, for the former, there will be no difference between the amount paid by the buyer to the seller and what the seller pays to their mortgage provider. This is because of removing all incentives for financial fraud and refinancing.
The Basics of Land Contracts – What should it include?
A land contract, or an installment contract for a real estate property, is an agreement to buy a piece of land that does not require the buyer to get pre-approved for the loan. There are many types of alternative ways to purchase a home or commercial property these days.
One of the most common ones is through a “land contract” agreement. A land contract form is an arrangement where ownership of the property changes gradually. Part of its value is used as collateral while partial payments are made all this time.
A land contract agreement must include some details:
- Agreement Date
- The terms, conditions, and limitations
- Payment Terms
- Document Title
- Recent Ownership Affidavit
- Seller Name
- Buyer Name
- Seller Address
- Buyer Address
- Seller Signature
- Buyer Signature
- Date of Conveyance