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Question by My Thoughts U Can’t Decode: How exactly does a land contract work?
I am renting a house right now and we are very pleased with it. The landlord is a friend of my sister and her husband and was talking to them about wanting to sell in the future. My brother in law told me I should talk to the landlord about a land contract since I don’t have good enough credit to get anywhere near a loan right now.
My question is, how exactly does a land contract work?
Answer by Ed
In a land contract transaction, you will take ownership in the form of an equitable title to the property and will then make “mortgage” payments to the seller instead of to a bank. The seller, in this case your landlord, will still retain legal title. This can be risky to do if the landlord has a mortgage and for some reason defaults. You also have additional risk since the landlord will still have legal title.
If you do decide to buy this house with a land contract, make sure to consult an attorney.
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