Put simply, a land sale contract is very similar to making payments on your mortgage (or on a piece of real estate property in another capacity), except that, instead of borrowing money up front from a financial institution such as a bank, payments are made directly to the seller until the property is completely paid off.
While many home buyers at one point or another will interact with a real estate attorney when they sign paperwork, land sale contracts should involve experienced real estate attorneys more extensively and up front during the process, as it is crucial that both buyer and seller understand and are satisfied with all of the contract terms and conditions before they sign the land contract. Some of these keys terms relate to the terms of payment, transfer of legal title, whether the transaction will involve a warranty deed or some other deed to convey title, and other related, important terms.
Why would a buyer and/or seller want to set up terms like these, where they directly make payments to the seller as opposed to a bank? These types of contracts do offer some unique benefits, such as the buyer avoiding having to pass a particular credit check requirement, or a seller having more options when it comes to potential buyers. These contracts can also provide more options for both the buyer and seller to uniquely craft an agreement outside the traditional mortgage, such as the seller requiring a larger cash down payment or negotiating a higher price for the property, or the buyer being able to have more control over their monthly payments.
However, as with any contracts that step outside the conventional way of conveying property, other terms can be unique as well. For example, the buyer has what’s called “equitable title” to the property in question while they are making their payments to the seller. This means that they have an interest in the property and the seller cannot sell that property to another party, or interfere with the buyer’s interests in other ways, such as subjecting the property to a lien.
However, the buyer does not technically possess legal title to the property until the final payment is made to the seller. Once this occurs, the deed is filed with the county naming the buyer as the technical property owner. If the buyer fails to make their payments, the seller reserves the right to file an ejectment action, which results in the buyer essentially forfeiting all of the funds paid to the seller pursuant to the land contract. That makes these types of transactions risky (to say the least), and thus working with an attorney who understands state real estate laws to help draft the terms of the contract such that they are both fair and enforceable is very important.
Birmingham & Mobile Real Estate Attorneys
If you are buying, selling, or managing a residential or commercial property, it is crucial that you work with experienced real estate attorney services in order to ensure that the transaction is successful.
At Cloud Willis & Ellis our experienced Birmingham real estate attorneys provide the very best services in the field of real estate law. Contact us today to find out how we can help with any contract questions you might have.