What’s a land contract and how do they work?

Discover a common buying strategy known as a land contract to learn how you can use them to buy everything from vacant land to homes, apartment buildings, and commercial buildings.

When buying a property, financing through a third-party is common but an alternative option exists that eliminates the need for them. This seller-financing method is called a land contract. Let’s explore how they work and what you’ll need to set one up.

What is a land contract?

A land contract is a legally binding agreement used to purchase real estate, and acts in similar ways to a mortgage. You can use it to buy vacant land, apartment buildings, houses, commercial buildings, or any other property type available for sale.

In most cases, a land contract eliminates the need for a third party. Buyers still pay a mortgage-like monthly payment but instead of borrowing money from a lender, they make direct payments to the real estate’s owner or seller until the property is paid off in full.

How land contracts work.

In a land contract, a buyer and seller enter into an agreement where the seller finances the real estate (whatever type of property it might be) in exchange for the buyer promising (and making good on that promise) to fulfill what’s delineated in the contract.

This offers benefits and drawbacks to both parties, so it’s crucial to understand each side before proceeding. To ensure there’s no confusion, most land contracts will include such details as:

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