One of the most commonly used legal forms used in real estate transactions is the Land Contract Form. Though this varies from state to state, the contents of which are relatively the same.
In some states, the Land Contract is called a Contact for Deed or an Installment Contract. What this contract states is that both the buyer and the seller have entered into an agreement wherein payment (partial of full) for a specified piece of property is deferred.
This payment method is usually availed of by “younger buyers” or those who have not yet firmly established their credit standing in banks. Entering into this kind of agreement allows them to have a house on very flexible payment terms. While they are paying for the home, their credit standing is improving and can, at the same time, work on securing a loan to pay off the property.
When both parties agree to this, the legal title of the property remains with the Seller and he turns this over only when the Buyer has finished paying for the land. However, even if the title is with the Seller, the Buyer has the right to take possession of the property. Because the legal title is still with the Seller (technically, he still owns it), he has to shoulder all the legal responsibilities that come with owning a piece of land, unless otherwise specified. All necessary taxes and / or payment of any previous mortgages or loans should be borne by him. If it’s stipulated in the contract (or discussed by both parties), the taxes paid by the Seller may or may not be reimbursed by the Buyer.