Land Contracts used to be more popular in the 70’s and even in the 80’s then as financing standards got soft, they fell off considerably. Expect them to come back as the credit market tightens up.
Basically the buyer and seller enter into a contract that states that the seller shall transfer ownership of the property to the buyer after the buyer has fully paid the seller the agreed price per the terms of the contract. The buyer/seller can work out whatever terms they want regarding the downpayment, interest rate, etc… As you can see there are many potential advantages for both parties. There are also tremendous pitfalls… During the terms of the contract the buyer holds legal possession and occupies the property and the transfer of the property is NOT made until the full price has been received.
Now if the buyer misses any payment under the land contract, he may lose the property AND the seller may keep the money paid up to that point as rent! Different states have different laws regarding this issue.
Also a buyer may be in trouble if the seller gets foreclosed on. In that case the buyer may be obligated to pay off the mortgage in the case of a seller default.
Of course my post here is quite vague. I would encourage anyone who is getting involved with a land contract to run as fast as possible to a good strong real estate attorney.
