A land contract is a type of financing also known as a conditional sales contract, a contract for sale, or a contract for deed. This kind of financing is actually an installment sale whereby the buyer gets only the right to obtain absolute ownership to the property. The buyer doesn't get the title to the property until some point agreed on in the contract--usually after a certain amount has been paid towards the principal or when the contract is paid in full. In the meantime, the seller retains 'bare legal title.' Land contracts can be risky. If the buyer takes over payments on the seller's existing mortgage, the lender may view this as violating the 'due on sale' provision of the mortgage contract. The lender may be able to foreclose on the original mortgage and leave the buyer/borrower with nothing to show for the payments he or she has been making. For more information on land contracts, contact a real estate professional.
