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Land Contract Selling Terms
- Payment of the purchase price under a land contract is made in installments. Often, the buyer cannot afford a down payment. In this case, the seller should demand a higher purchase price in exchange for foregoing a down payment. Although payment may be made in equal monthly installments, other arrangements are sometimes used. If the buyer anticipates future improvement in his financial status, payments may gradually increase over the years, and a large "balloon" payment may be required for the last installment.
- If the buyer intends to live on the property, the seller usually allows him to move in as soon as the down payment or the first installment is made. Once the buyer obtains possession of the property, whether or not he lives on the property, the seller loses the right to enter the property except for certain reasons, such as inspection or repair, that are similar to the entry rights granted to a landlord under a lease agreement.
- The seller retains legal title to the property until the buyer pays the final installment. The seller also keeps possession of the title deed. In some cases, the seller's interest in the property is subject to a mortgage held by a lender that financed the seller's purchase of the property. In such cases, the buyer's right to ultimately obtain title to the property is subject to the lender's right to foreclose if the seller defaults on the mortgage.
- A buyer under a land contract is particularly vulnerable if he defaults on his installment payments. Since the buyer does not have title to the property, the seller can have him evicted with no need to resort to foreclosure proceedings. The buyer will lose any chance to obtain title to the property, and will not be entitled to a refund of installments already paid. To evict a buyer who has defaulted, however, the seller must seek a court order if the buyer refuses to leave voluntarily. Typically, a local official such as a constable will physically evict the buyer.