As house loans are getting harder and harder to come by after the sub-prime crisis, house-hunters are looking for newer ways to finance their purchase of land. Land is an extremely pricey commodity wherever you go, so it is not always as simple as going to a bank, making a withdrawal from your account and paying the necessary amount. One of the popular ways of purchasing a land is through a land purchase contract.
What is a Land Purchase Contract
A land purchase contract, like any other contract, is an agreement between two parties, one the buyer and the other the seller, for a property deed. The deed to a land forms the consideration of this contract. We can think about it is a 'loan' given by the seller of the land, which the buyer will repay within the specified time, with the specified amount. Simply speaking, a land purchase contract is like a lease agreement, except that the buyer gets the deed of the land at the end of the lease period. The vendee has to pay a down payment on the property as well. So while the ownership of the land remains with the vendor, the vendee, for consideration, enjoys the use of the property and has to pay the necessary dues for maintenance.
Entering into a Land Contract Agreement
The seller and buyer enter into a contract stating that the seller will agree to transfer the deed of property to the buyer, specified in the contract, after the buyer has paid the required agreed-upon amount, in the form of installments, for the required period of time. It is always beneficial to both parties to have their land contract forms examined by certified real estate attorneys to avoid any legal discrepancies, or if some terms of the contract are not in agreement with the law of the state. The exact laws governing the sale of land on contract vary from state to state, so it is always beneficial to employ an attorney. The amount specified in the contract would be inclusive of rent for the use of the land, along with the interest. The vendee also has to pay the down-payment on the contract. A land contract provides protection to the vendor. In case the vendee defaults on regular payments, the vendor can rescind the contract.
Land Contract Workings
A land purchase contract works in favor of both the parties. The vendor enjoys the ownership of the land until the final payment is made, thus securing him from defaults. In case of default, the vendor is not liable to pay the installments or the down payment which he has already received on the land. The vendor can prepare a contract as per his wish, as there are no regulations governing the land purchase contract. He can even ask for a higher price than the market rate, if the buyer is ready to pay. The vendor also gets paid in convenient installments, as opposed to a lump-sum, so he enjoys a continuous flow of passive income along with the ownership of the land, for that period.
For the buyer, he can avoid running to the banks, and the whole paperwork process. Anyway, since loans are hard to come by and credit-rating scales are becoming more and more strict, this option for buying land is one of the best available to him. He can pay small amounts over a period of time, thus not burning a big hole in his pocket. He is allowed to enjoy the use of land for almost all purposes, as if it were his own. He only cannot mortgage that land, as it does not belong to him yet. Lastly, unlike renting, the buyer, at the end of the contract period, gets ownership of the property, which is a valuable asset.
Buying land today is a common aspiration. So don't be disheartened simply because you are unable to procure a loan. The land purchase contract is a very good and convenient alternative method to buy a land. And it's very simple, too!
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