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Land contract cons.Higher interest rates Since the seller is taking most of the risk, they may insist on a higher interest rate than a traditional mortgage. Ownership is unclear The seller retains the property title until the land contract is paid in full.

A big disadvantage for sellers who participate in a land contract is that they have to wait for the buyer to pay off the home over a certain number of years.A balloon payment might be included so that a buyer has to pay off the balance within a shorter amount of time.

A land contract can be an appealing option for a potential homebuyer who might have difficulty qualifying for a mortgage loan. But there are potential risks to be wary of as well.Instead of taking out a mortgage, the buyer agrees to make regular payments directly to the seller, who still retains title to the property.

How to Write a Land Contract AgreementNegotiate the basic terms.State the purpose of the contract and the identity of the parties on the first page.Identify the property using its legal description.State the amount of the down payment if any.More items...

How does a land contract work?Identify a land contract home.Negotiate the terms of the land-purchase agreement.Arrange an inspection.Sign the land contract.Move into the home.Record the land contract.Begin making installment payments.Pay off the loan.Feb 20, 2020

As a type of specialty home financing, a land contract 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.

Disadvantage #1: The title does not automatically pass to the purchaser in a land contract. Disadvantage #2: The seller could be held legally responsible for inspection issues with local or state authorities. Disadvantage #3: Forfeiture of a land contract by the purchaser is a fairly common occurrence.