A land contract may allow a buyer to obtain real estate even if he or she is not able to obtain financing through regular loan channels. A land contract may allow a seller to market a property when interest rates are high.
If a buyer with limited financial capacity purchases with a land contract, then a seller may have problems collecting monthly payments. However, since a buyer with a land contract does not have title until all conditions are met, it is often possible for the seller to get the property back with a “forfeiture” rather than a “foreclosure.” The attraction of a forfeiture is that it is much quicker to obtain than a foreclosure. It is also a complex undertaking that should only be done with an attorney.
If a land contract involves the use of existing financing that cannot be assumed, that could set-off a due-on-sale clause. Both buyers and sellers could lose the property if the loan cannot be repaid.
Or, suppose Seller Jones sells a property to Buyer Smith using a land contract. Title will remain in Jones’ name until Smith makes a certain number of payments. But suppose that Jones goes bankrupt. What rights does Smith have to the property? Or, suppose Jones does not pay the property taxes? If the local government forecloses, what rights does Smith have?
Also, what happens if Seller Jones goes off to Tahiti? How does Buyer Smith get title? Land contracts should be seen as complex arrangements. Both buyers and sellers should consult an attorney or legal clinic (separately) to assure that all aspects of the transaction are fully understood.