When my parents retire in a few years they asked me if i wanted to do a land contract for their house. They seem to think it will be beneficial for all involved. I have no experience with land contracts. Anyone have any advice or reccomendations? How do they work?
They vary from state to state, so you should talk with a lawyer or real estate agent familiar with your state laws.
However, in general, Land Sale Contracts are a way to sell property with a security interest. The seller and the buyer enter into a contract whereby the seller retains legal title to the property (but equitable title automatically vests in the buyer upon signing the contract) until all payments are made. When final payment is made, the seller gives the buyer a "fulfillment deed," transferring legal title to the buyer. If the buyer defaults, there is typically some sort of forfeiture process whereby the buyers loses equitable title and the right to the property. That's the seller's security.
That's the quick and dirty. Please note there are a number of complex details when dealing with LSKs. For example, upon default, sometimes the buyer is entitled to a refund of principal payments made, and sometimes they're not. Usually, the buyer is given a statutory cure period, but that period may vary depending on how much principal they have paid.
They were popular during the 60s and 70s, but have become increasingly less popular since the 80s. Trust Deeds are the norm these days.
