Use Land Contract Forms for the Real Property Purchase

In America, Land Contract Forms is known by different names, such as ‘Contract for Deed’, Agreement for Deed’ or ‘Installment Contract’. The main purpose of the deed form, is to record the purchase agreement between the seller and buyer, for the purchase of the real estate property, where small portion of the total purchase value is paid in advance and the balance money is paid as per agreed or stipulated time, as mentioned in the deed. This payment may carry certain percentage of interest also, which will have to be paid on the balance due. The payment of the real property may be paid in installments or as specified in the agreement deed. The buyer is also not liable to receive the Land Contract Deed, till full and final payments are made.

The whole essence of the Land Contract Forms or Contract Deed is the formulation of purchase deal, where small payment is received in advance against the purchase price and balance is deferred to the future date. The legal title of the property would be transferred or the deed is given to purchaser, when the full and final payment is received by the seller. Till that date, legal ownership lies with the property or land owner and he is also liable for any due expenses such as mortgage loan or any other liabilities concerning the property.

There are various reasons, why Land Contract Forms are used for the purchase of the property. The main advantages of such contract deeds can be summed up as follows:

Firstly, the seller enjoys the benefit of interests, which the buyer pays as deferred payment on the purchase amount.

Secondly, it is easier for the purchaser to make payments in installment, as paying whole amount at a time may not be viable option or possible, if the amount is big.

Thirdly, the buyer may have bad credit in the market, where getting the financing is difficult.

Fourthly, the closing costs are affordable and generally low.

Fifthly, in such purchases, the interest rates are more favorable to the purchaser, as compare to other types of financing. The financier also tends to lend money on easy term of payments on such purchases.

Sixthly, the seller minimizes the risk factor by holding the title of the property till end.

The main disadvantage of such contract deed purchases lies with aspects related to mortgage of the property

• The seller benefits, if the purchase deed payment due date matures before the mortgage foreclosure.
• Depreciation of Property value may occur, if there is cancellation of the deal after certain period of time and if the seller may have to repossess the property.
• The property may be mortgaged and the land contract may violate the mortgage provisions regarding the sale, which might not be in knowledge of the buyer.
• In such mortgage case, the buyer may loose the money paid as installment and as well as home due to his unaware of the mortgage.

Many states make it necessary to record the Contract for Deed Form as evidence but recording mainly depends on the necessity of the specific state. On many occasions, the seller and buyers may not want to record the deed in fear of leaking out the terms recorded in the contract.