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A land contract is a form of seller financing. It is similar to a mortgage, but rather than borrowing money from a lender or bank to buy real estate, the buyer makes payments to the real estate owner, or seller, until the purchase price is paid in full.

Larger Down Payments Land loans typically require a larger down payment than traditional mortgages, often as much as 20% to 30% of the asking price. If you are purchasing raw land, the preferred down payment can be as much as 30% to 50% of the total cost.

At a minimum, a land contract should list the address of the real estate and the full legal description of the property, the purchase price, down payment amount, the monthly payment amounts and term, number of payments to be made, and any balloon payment required.

If the buyer defaults on the land contract, or fails to make the monthly payments to the seller as required, the seller can file a court action called land contract forfeiture.In other words, if the buyer fails to pay, the seller keeps all money received, plus the seller keeps the real estate.

Q: Can you sell a house that you are buying on land contract if you have not finished paying for it? A: Yes you can, but you will need a good real estate attorney to do this for you, one that can structure this type of transaction.

The Payoff When you refinance a land contract, the initial contract you have with the seller gets paid off.Look out for any prepayment penalties you may have for closing the contract early. If you really want out, you may choose to pay these anyway, but it's something to be aware of. Know your credit score.

Generally speaking, land contract agreements must always be formalized into writing and signed by the parties involved. The statute of frauds governs contract agreements and requires any contract involving the sale of land to be in writing.