A land contract agreement may be arranged between a potential buyer of a home and the seller. In a land contract, the seller may agree to provide financing for the buyer. In return, the buyer provides monthly payments on the home according to the terms of the contract.
This type of land contract agreement helps both the buyer and the seller to complete the sale transaction. Rather than having to find outside financing, the buyer can work out a financing arrangement with the seller, if the seller is willing and has the resources to do so. Land contract agreements may be subject to limitations depending on state laws.
Generally speaking, land contract agreements must always be formalized into writing and signed by the parties involved. The statute of frauds governs contract agreements and requires any contract involving the sale of land to be in writing.
In addition to the writing requirement, the contract should be clearly written, and preferably drafted and reviewed by a lawyer. This will help minimize the amount of confusion or disputes that might arise over contract terms in the future.
Most land contract agreements are also installment contracts. That is, the buyer usually renders their payments on a monthly installment basis. If the buyer fails to make payments on the home, they may be liable for damages covering the missed payment(s). In some cases, they may become liable for future payments if the evidence shows that they intended not to pay anymore remaining installments.
Likewise, the seller can also become liable for a breach of contract. For instance, if they violate their duty to provide financing, or if they attempt to transfer title to a different party, it could lead to a damages award in favor of the other party.
Lastly, land contract violations can lead to other types of remedies. For instance, if the paying party is insolvent and can’t make the payments for whatever reason, the court may order them to transfer title to the seller (i.e., placing a lien on the property).
Land contract agreements provide alternative options for both buyers and sellers in a home sale. However, they generally require the assistance of an attorney during the negotiation and drafting stages. You may wish to hire a qualified real estate lawyer in your area if you need help with a land contract agreement. Your attorney can review the documents for you, and can also represent you during any court proceedings you may be required to attend.