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 Value

    The value of a piece of property, including both the value of ...
  2. Land Value Tax - LVT

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

    A fraudulent practice in the real estate business of selling ...
  4. Purchase-Money Mortgage

    A mortgage issued to the borrower by the seller of the home as ...
  5. Land

    Property or real estate, not including buildings or equipment, ...
  6. Land Trust

    A legal agreement where a trustee is appointed to maintain ownership ...
Related Articles
  1. Investing

    There Are More Ways To Invest In Land Than You Think

    You don't have to have a huge amount of capital to invest in land. You have many other options, including land-related ETFs and ETNs.
  2. Managing Wealth

    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.
  3. Managing Wealth

    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.
  4. Investing

    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.
  5. Investing

    Understanding Property Deeds

    A property deed is an instrument that enables sellers to convey real property to buyers, who become the new owners.
  6. Personal Finance

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  7. Investing

    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.
  8. Trading

    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.
  9. Trading

    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.
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 an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
  5. 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 >>
Trading Center