Have a title search conducted and obtain title insurance.
- Have the property inspected, regardless of the seller’s disclosures.
- Record the Land Contract in the county where the property is located to protect against claims by those who would subsequently obtain an interest in the property.
- Watch for subordination agreements allowing the seller to give a security interest superior to the Land Contract.
- Ensure that the payment terms and all other fees are clear.
- Ensure there is a deed clause requiring seller to prepare and convey a deed.
- Pay attention to default provisions that allow acceleration or default for reasons other than nonpayment. An acceleration clause is not enforceable if there were a good faith dispute about the property condition or the balance due.
- The Land Contract should provide for possession by the buyer.
- Buyer should file principal residence exemption affidavit.
- Buyer should file transfer tax affidavit upon contract completion of the contract and conveyance.
Closing the Land Contract:
The closing documents will include a land contract instead of a deed. Upon the parties signing the land contract, the buyer acquires an equitable interest in the property while the seller retains legal title. The deed is typically to be delivered by the seller when the land contract is paid in full. The buyer should record the land contract or memorandum of land contract to provide record notice of the buyer’s interest in the property. Parties often execute and record a memorandum of land contract because it provides record notice of the existence of the land contract without making all of its terms and conditions a matter of public record.
In most other respects, land contract sales are similar to ordinary sales. At closing, the parties execute and deliver closing statements, owner’s affidavit, a property transfer affidavit, homestead affidavit, and other typical closing documents.