Land Contract

DEFINITION of 'Land Contract'

An agreement between a buyer and seller of property in which the buyer makes payments toward full ownership (as with a mortgage), but in a land contract, the title or deed is held by the owner until the full payment is made. This type of contract is technically not a legally binding agreement and, therefore, many different types of payment formats can be found.

As in a standard mortgage, there is an agreed upon price and payment schedule, but the payments are often not amortized evenly, so that a large balloon payment may be required to complete the purchase. Also known as an installment purchase contract or an installment sale agreement.

BREAKING DOWN 'Land Contract'

A land contract can be thought of as a "lease with an option to buy". Certain states have more generous legal rights for land contract holders than others. As a result, the world of land contracts can be difficult to navigate. As such, a land contract buyer must be very careful to ensure that the terms of the contract are legally binding in case a dispute arises in the future.

Land contracts are often used by purchasers that would not otherwise qualify for a mortgage, or by investors who wish to complete a purchase faster than a regular mortgage would allow.

RELATED TERMS
  1. Land Flip

    A fraudulent practice in the real estate business of selling ...
  2. Land Value Tax - LVT

    A tax on the value of a piece of land. Land value tax inherently ...
  3. Land Trust

    A legal agreement where a trustee is appointed to maintain ownership ...
  4. Graduated Payment Mortgage

    A type of fixed-rate mortgage in which the payment increases ...
  5. Forward Exchange Contract

    A special type of foreign currency transaction. Forward contracts ...
  6. Front Month

    Used in futures trading to refer to the contract month with an ...
Related Articles
  1. Home & Auto

    Rent-To-Own Homes: How The Process Works

    Here's what to watch for when negotiating a contract for a rent-to-own home – and who is a good candidate for this option.
  2. Real Estate

    How to Keep a Land Investment From Going Bust

    Investing in land can yield big returns. But investors should consider their goals, as well as the following details, to make the deal a success.
  3. Home & Auto

    Uncover The Next Real Estate Hot Spot

    Real estate land speculation is a way to get in on a hot investment before a boom hits.
  4. Home & Auto

    Understanding Property Deeds

    A property deed is an instrument that enables sellers to convey real property to buyers, who become the new owners.
  5. Credit & Loans

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  6. Home & Auto

    The Pros and Cons of Owner Financing

    Details on the upside and risks of this type of deal for both the owner and the buyer.
  7. Term

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  8. Options & Futures

    Rent To Own; Own To Rent

    This method can help first-time buyers afford a home using a rent-to-own strategy, and it can also be good for investors.
  9. Home & Auto

    Rent-To-Own Homes: How The Process Works

    A rent-to-own agreement can benefit homebuyers with bad credit or insufficient funds for a down payment. Here’s how one works.
  10. Options & Futures

    Housing Deals That Fall Through

    Find why buyers back out and what you can do if you're left holding the bag.
RELATED FAQS
  1. What is the difference between forward and futures contracts?

    Fundamentally, forward and futures contracts have the same function: both types of contracts allow people to buy or sell ... Read Answer >>
  2. How can a futures trader exit a position prior to expiration?

    A futures contract is an agreement to buy or sell a commodity at a pre-determined price and quantity at a future date in ... Read Answer >>
  3. How do the investment risks differ between options and futures?

    Learn what differences exist between futures and options contracts and how each can be used to hedge against investment risk ... Read Answer >>
  4. What is a forward contract against an export?

    Understand forward exchange contracts in exporting, and learn the purpose of using a forward contract and its advantages ... Read Answer >>
  5. What are the differences between installment sales and credit sales?

    Determine the differences between credit sales and installment sales, which businesses often offer their customers for deferred ... Read Answer >>
  6. What does a futures contract cost?

    Learn about values of futures contracts and the initial margin a trader must place in an account to open a futures position, ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center