How to Write a Land Contract

Write a land contract for the sale of property.

A land contract is a contract between a buyer and seller that allows the purchaser of a piece of property the opportunity to make set payments with interest to the seller. At the end of the contract there is typically a balloon payment of the balance owed. There are advantages to a land contract for both buyers and sellers. The buyers purchase property at an affordable monthly payment with little to no money down and no need to go through a bank. The seller receives a monthly stream of income from the buyer with interest for the term of the land contract. Land contracts are also known as Trust Deeds, Contract for Deed, Deeds of Trust or Privately Held Mortgages.

Instructions

1. Identify the parties in the contract. Include their name and address. The seller is usually listed first and then the purchaser. Also include the date on the contract. This is the date when interest begins to accrue.

2. List the legal description of the property being sold. The legal description is an exact description of the property. The legal description is usually found on the deed to the property.

3. Add the price being paid. This is broken down into purchase price, down payment, balance owed, monthly payments, payment due date, grace period, interest rate and final balloon payment. Negotiate the terms for the payments of taxes and insurance. This is normally the responsibility of the buyer, but there are situations where the seller offers to pay this as terms of the sale and includes what they pay in the final balloon payment.

4. Include a section that gives the responsibility for property maintenance to the buyer during the terms of the land contract. The buyer assumes all responsibility for the property being purchased. Finalize the land contract with the promise to provide proof of title and convey the deed when the final balloon payment is received.

5. Indicate places for buyers and sellers signatures and date and for a notary signature and seal.

Tips & Warnings

• Land contracts are legally binding documents. Even though the process seems simple, consult a qualified real estate attorney to make sure the document is correct and legal.

References

• The Standard Legal Law Library: When and Why a Land Contract Makes Sense