How to Write a Land Contract Agreement

Land contracts can be used to purchase real estate without a down payment.

A land contract, also known as a contract for deed, is an alternative to a standard real estate sale and purchase agreement. Under a land contract, the buyer pays installments directly to the seller without securing a home purchase loan from a third party. Title is transferred only when the buyer completes all installments. Land contracts are often used when the buyer lacks credit or cannot afford a down payment. Although different states have enacted different legislation governing land contracts, they are generally governed by standard contract law.


Step 1

Negotiate the basic terms. The most important are the down payment (if any), the total purchase price, the interest rate, penalties for late payment, rules for default and the term of payment -- 20 or 30 years, for example. As you write the agreement, subtle issues may come to light that may require further negotiation.


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Step 2

State the purpose of the contract and the identity of the parties on the first page. Entitle the contract "Land Contract," "Contract for Deed" or some other term that clearly identifies the purpose of the agreement. If one or both of the parties is a company, identify the company by its legal name, if this is different from its trade name. State which party is the buyer and which party is the seller.


Step 3

Identify the property using its legal description. The legal description should appear on the title deed. The street address may not be enough to identify it, because street addresses can change.

Step 4

State the amount of the down payment if any. Some agreements allow the down payment to be waived or delayed until the final installment. State the date upon which possession will revert to the buyer -- typically, the date when the down payment or the first installment payment is made.


Step 5

List the purchase prince, the interest rate, and the total purchase price (purchase prince plus total interest.) State whether or not the buyer may avoid interest by paying installments early. List the date each installment is due, and the amounts due. Installments need not be structured in equal monthly payments -- feel free to make flexible arrangements according to your mutual needs.



Step 6

Create a section that imposes late payment penalties, and state the conditions for default. The default section is particularly important, because in many states if the buyer defaults, even on the last payment, the seller is entitled to seize the property without foreclosure proceedings, and the buyer receives no refund of amounts already paid.


Step 7

Insert a statement requiring the seller to cooperate with the buyer in transferring title to the buyer as soon as the ttal purchase price is paid.

Step 8

Prepare a signature line identifying the parties by name. If one party is a company, the company's name should be placed directly below the signature line, and the company representative's name should be placed on the line below along with his title. This will prevent the representative from becoming personally liable under the agreement.


Some states, such as Indiana, have enacted legislation protecting the equity invested by a buyer under a land contract in the event of default.



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