Also known as a land contract, contract for deed, or installment contract, an installment land contract is like buying any item or service on time and the debt is fulfilled via installment payments. In the case of an installment contract between a buyer and a seller, the seller retains legal title of a property while at the same time financing the sale price of that property to a buyer on an installment method The seller has the right to hang onto the title until the last payment on the debt is made.
Unlike a conventional deed of trust, in the case of an installment land contract there is no deed that passes hands. The buyer can move onto and live on the property as long as he or she continues making regular payments. Long-term financing can be assured with such an arrangement. The title must be passed on to the buyer once he or she either pays the balance in full or has fulfilled a substantial percentage of the total debt.
An installment land contract can be beneficial in a slow market and is normally marked by a lower down payment. This is not the most advantageous position for sellers, but in the end potential income tax advantages from such a sale may provide some tax relief down the road. From a buyer's perspective, the land contract provides alternative financing in those times when money is tight and interest rates are high.
Both buyer and seller can benefit from an installment land contract especially when a property is unique or controversial in some way as to make conventional financing unavailable. Traditional loan processing situations usually call for more processing delays and higher closing costs. The seller still holds legal title and the deed to the property, which insures that should the buyer default, he or she will still retain all payments and clear title.
The installment land contract benefits both buyers and sellers because the buyer can purchase the property without having to qualify for a loan or to pay closing costs and the seller can hang onto the title. Sellers should be aware that although they are protected against non-payment on the part of the buyer, legal fees could be extensive and foreclosure proceedings may take some time.
Unlike a conventional deed of trust, in the case of an installment land contract there is no deed that passes hands. The buyer can move onto and live on the property as long as he or she continues making regular payments. Long-term financing can be assured with such an arrangement. The title must be passed on to the buyer once he or she either pays the balance in full or has fulfilled a substantial percentage of the total debt.
An installment land contract can be beneficial in a slow market and is normally marked by a lower down payment. This is not the most advantageous position for sellers, but in the end potential income tax advantages from such a sale may provide some tax relief down the road. From a buyer's perspective, the land contract provides alternative financing in those times when money is tight and interest rates are high.
Both buyer and seller can benefit from an installment land contract especially when a property is unique or controversial in some way as to make conventional financing unavailable. Traditional loan processing situations usually call for more processing delays and higher closing costs. The seller still holds legal title and the deed to the property, which insures that should the buyer default, he or she will still retain all payments and clear title.
The installment land contract benefits both buyers and sellers because the buyer can purchase the property without having to qualify for a loan or to pay closing costs and the seller can hang onto the title. Sellers should be aware that although they are protected against non-payment on the part of the buyer, legal fees could be extensive and foreclosure proceedings may take some time.
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