A land contract is an agreement in which the seller of real property–property and buildings–agrees to finance the sale of the house instead of a third party financing entity like a bank. The buyer pays periodic payments directly to the vendor and generally does not obtain title to the home until the final payment is compensated. Land contracts are usually used when the buyer does not have sufficient access to credit to secure third-party financing. At a land contract, the seller, instead of a third-party funding entity, assumes the risk that the buyer will default.
Describe the house in the first section of this contract. Don’t use a street address because these often change. Rather, look up the house in the county property records office and copy the description employed by the local authorities. County land records offices usually utilize plat amounts or metes and boundaries.
Establish the total sales price. Land contracts are usually used when the buyer cannot afford a down payment. The lower the down payment is, the more a seller is usually able to demand for the entire price.
Summarize a payment program. The program should incorporate the interest rate, late-payment penalties and default provisions. Penalties should not go beyond the expected actual loss of the buyer in case of overdue payment because penalties in excess of the level could possibly be classified as”punitive” and therefore unenforceable by a court. Make certain default activates are spelled out in this section. Be certain that you state exactly how payment is to be created. If payment is to be made by bank transfer, bank account details should be contained.
Clarify the disposition of this title. In most property contracts, title to the property stays with the vendor until the final installment is paidoff. If the buyer defaults prior to gaining title, the seller will probably have the right to recover ownership of the house without going through foreclosure processes. Ensure this is clearly stated in the contract. Address compensation to the buyer in case he defaults after paying payments and neglects to get title.
Include standard contract”boilerplate” provisions. Boilerplate provisions are provisions that appear in a wide variety of contracts. Examples include dispute-resolution processes (such as arbitration), non-assignment clauses, methods of legal notification and governing-law clauses. Take note that state law may restrict the material of some boilerplate provisions. By way of example, since property is immovable, the law of this state in which the property is situated may need to be utilized.
Add an area for the two parties to sign, and date the contract. If both parties are a company, the name of the company ought to be utilized, and the name of the signing representative needs to be set on another line below together with a note indicating that the person is signing on behalf of the company. Produce two copies of this contract, have both parties sign the two copies, and provide 1 copy to each party. Consider getting all ribbons. If permitted by law, Document the contract with the county property recorder office.
Transfer ownership of this property to the buyer when the contract is signed.