The Ins and Outs of Land Contracts

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Land contracts have started to see growth and have become a creditable option for homebuyers to use since the mortgage crisis of 2007-2010. They are used when a buyer is not willing to go through a bank or other type of mortgage company or when they may not have the credit score they need or meet the qualifications of the application for the house they want. But what is a land contract, and how does it work? What are the pros and cons of obtaining a land contract? At Southern Title of Ohio, we believe it is essential to know what you are getting yourself into, so in this article, we will go over these topics so that you know if this option is right for you.

A land contract is a written legal agreement used to buy real estate, such as vacant land, a house, an apartment building, a commercial building, or any other property. It is similar to a mortgage, but instead of borrowing money from a lender or bank, the buyer pays the real estate owner or seller until the purchase price is paid in full. You may see these kinds of contracts called something else depending on your location, like installment land contracts, contracts for deeds, memorandums of contracts, real estate contracts, or bonds for a title.

The pros of a land contract are as follows:


  • It is easier to get financing. These contracts make it easier for people who may not be able to get a mortgage through traditional means and allows them to build their credit while already living in their home.
  • It is a win-win for sellers. This is because they have met their goal of selling their property and are also getting a steady stream of income from you. They can take it right back if you don’t make the payments.
  • More purchase opportunities. You can get the home at first through the land contract, and then once the payment becomes smaller, you can pay off the contract with a mortgage.


  • You depend on the seller. As a buyer, you are placing a ton of trust in your seller. If the seller isn’t being upfront with you or doesn’t have the mortgage paid off themselves, you could lose the home at no fault of your own.
  • Higher interest rates. Because the seller is taking on a higher risk, they will charge you a higher rate than you would typically see.
  • Homeownership Gray Area. In a land contract, you will receive an equitable title to gain equity as you make your payments. However, the seller still holds the legal title until you have paid in full. This can cause issues if you need to file an insurance claim or have any legal disputes for any reason.

So there are the ins and outs of a land contract. Remember, it is always important to review every inch of your contract to ensure you and the seller are on the same page. You want to avoid surprises when buying your home or piece of land. Call Southern Title of Ohio if you need assistance with your land contract or other title services. We have locations in Mansfield, 419-525-4600; Wooster, 330-263-5080; Galion, 800-525-2921; and Sandusky, 419-621-5550, ready to help you when you need us.

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