• Property Identity: Is it clear which legal parcel is being sold and what its boundaries are? It’s easy to check the public GIS records to make sure that what the County thinks the property boundaries are matches what the parties think is being sold. (Also good to check whether there might be any obvious boundary disputes with neighboring properties).
  • Term: Over how many months will the seller finance the transaction? Is there a simple-to-understand schedule of payments?
  • Interest Rate: Is the interest rate fair?  When you check the calculations, is the actual interest rate paid the same as the interest rate listed in the contract?
  • Disclosures or Warranties:  Has the seller disclosed all defects that the seller knows about? Is the seller making any warranties about the condition of the home or major systems (e.g. plumbing, electrical, HVAC, roof)?
  • Control: Does the buyer have full control over the property, except to allow the seller the right to inspect the property from time to time upon reasonable notice?
  • Recording: Do the parties plan to have the land contract (or a summary) recorded? The buyer wants this both to give notice to the world of their interest and also to enable them to claim a homestead exemption.
  • Mortgage Right: The seller should retain the right to mortgage the property during the term of the contract, so long as the balance of the mortgage loan never exceeds the balance due on the contract.
  • Forfeiture: Have the parties agreed at what point the seller has made enough payments that they have “a substantial interest” in the property such that a default would lead to foreclosure rather than forfeiture? It’s better to pick a dollar figure – usually around 30% of the purchase price.

Finally, when someone is buying a home on land contract, it’s always a good idea to have a basic title search done on the property before signing the contract. For around $150, a title company will comb through public records to (a) confirm that the party selling the home actually owns it and (b) reveal whether any other parties have liens on the property. It would obviously be a waste of time and money for a buyer to make years of payments only to later learn that the seller can’t transfer clean title.

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation.