Land contracts – A letter from Peter

June 9, 2009

Dear James,

I read one of your articles on Biggerpockets about three ways to buy real estate.  You mention a ‘Land contact’.  I have never used one of these before.  Would you have a sample that you could send me without names and data so that I can see what they are like?  Thanks,  Peter

Hi Peter,

Land Contracts are a bit more popular in certain areas than others. They may also be called something different in other locations, such as “contract for deed”,  “installment sale”, or “trust deed”, etc.

It is essentially and agreement where the seller acts as the bank. The difference between this and simply holding a first mortgage is that the deed stays in the sellers name until a certain equity point has been reached by the buyer (often a complete payoff).

This arrangement gives the seller more protection and control than transferring the deed and just holding paper would.

The seller usually still has to foreclose on the land contract as the buyer does have a level of ownership/equity interest under the contract.

Here are a few sites with good information on Land contracts:

Take care,