What is a Land Contract – Understanding Land Contracts?
When it comes to real estate business, there are many contracts that a person must be familiar of. One of these contacts is a land contract. To understand what a land contract is, here are some of its basics.
1. What is a land contract in general?
It is a contract whereby the buyer buys a parcel of land or a property my instalments. The contract is executed upon payment of a down payment by the buyer. The buyer then promises to may monthly or yearly amortizations until the purchase price of the property is totally paid.
Thus, what is a land contract in general is an agreement to buy and sell a land property.
2. What is a land contract difference from Land sale deed?
Deed of sale is a contract whereby seller delivers both the possession of the land and the ownership of the same to the buyer.
What is a land contract difference from a deed of land sale is that in land contract, what is only delivered by the seller to the buyer is only the possession of the land. The delivery of ownership of the property however is subject to the condition of full payment of the amortization in a specific period.
3. What is a land contract compared to contract of lease?
A contract of lease and land contract are almost the same as they involve the transfer of possession of the property to the second party which is either the buyer or the lessee. In lease however, the second party does not have any intention of owning the property and the owner himself does not have the intention to sell the property.
Thus, what is a land contract different from a lease is that in a land contract, the second party of the buyer may eventually own the property after a specific period of time.
4. What is a land contract seller responsible for?
A land contract seller is responsible for the warranty of the property. When the seller sells the property, he warrants that the buyer will have a peaceful possession of the property. Further, that no other person can evict the buyer from the latter’s possession of the same. More importantly, what is a land contract sellerresponsible for is to make sure that the land is not in any way subject to encumbrances by any person or by the state upon the execution of the contract.
5. What is a land contract buyer responsible for?
A buyer in a land contract is responsible to pay the down payment and the amortization of the property to the land contract seller. Unless, the seller in a land contract agrees, he cannot also resell the property to other person. What is a land contract buyer’s right is inchoate ownership; hence he does not have the authority to sell. He is also responsible to inform the seller of any encumbrances that may arise during the period of the land contract. If he fails to inform the seller, he may be made liable for whatever encumbrances that arise during the term of the contract.