Buyer’s Pros and Cons: Land Contract

Are you considering buying a home under a Land Contract? Review the positives and negatives that should be considered before you begin.

Pros for a Buyer in a Land Contract:

• Buyer obtains possession of the property immediately, without needing to pay the entire purchase price for the property.

• Allows Buyer time to save money for a down payment and future financing from a lending institution or third party source.

• At the outset, Buyer avoids many of the closing costs associated with a bank financed loan.

Cons for a Buyer in a Land Contract:

• Seller may not have good or clean title to the property after all of the payments are made by the Buyer, or there are defects or issues that affect title to the property (for example, previously undisclosed easements, problems with prior deed language, environmental issues, etc.)

• Seller may refuse or be unable to fully pay an existing mortgage on the property after receiving all payments from Buyer, thereby subjecting Buyer to that mortgage.

• If Buyer misses a payment or is late on a payment, all payments that were previously made could be lost to the Seller.

• During the contract, the property could be lost to a foreclosure action filed against the Seller, the Seller could file bankruptcy, a divorce action could prevent the Seller from executing a deed in a timely manner, the Seller may die and his or her heirs may seek a way to terminate the land contract, the property could be condemned, the Seller may have unpaid taxes or child support obligations that cause a lien or encumbrance to be placed on the property.


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