Glossary · LEGAL

Land Contract

A purchase agreement where the seller retains legal title until all payments are made - also called contract for deed.

In a land contract, the buyer takes equitable interest and possession but legal title stays with the seller until the contract is fully paid. This structure is common in certain Midwest states. The risk for buyers is significant: many states allow forfeiture clauses that let the seller cancel the contract and keep all payments if the buyer defaults - without going through the full foreclosure process. Additionally, because title stays in the seller's name, online DSCR lenders typically will not refinance a land contract until title transfers. Local community banks have more flexibility. Whenever possible, negotiate for deed transfer at closing or after a short seasoning period rather than accepting a full land contract.

Related Terms

Deed of Trust

A three-party legal instrument that secures a promissory note against real property, used in most we

DSCR

Debt Service Coverage Ratio - the ratio of NOI (or rent) to annual debt service, used by lenders to

Seller Financing

A transaction where the property seller provides the loan directly, eliminating the need for a tradi

Subject-To

An acquisition where the buyer takes the deed but leaves the seller's existing mortgage in place, ma

Title Insurance

An insurance policy protecting against losses from defects in the property title that existed before

Apply this in real deals

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