How Does Buying a House on Land Contract Work?


Quick Answer

When parties enter into a land contract to purchase a home, the contract is a form of financing the seller provides to buyer, Nolo explains. The buyer makes payments to the owner of the home until he pays for the home in full. After satisfying the terms of the sale, a deed transfers the title of the property to the buyer.

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Full Answer

During the time the buyer makes payments to the seller, the buyer has equitable title in the property and has an interest in the property, Nolo says. This means the seller can't sell the party to a third party or subject the property to an encumbrance or lien that interferes with the buyer's interest in the home.

The title to the home remains with the seller until the buyer has made all payments. Once the buyer pays in full and meets all conditions, the seller files the deed with the official register of deeds, and the buyer becomes the legal owner of the home, Nolo states.

If the buyer defaults or does not make the required payments to the seller, the seller can file a land contract forfeiture in court. The result is the buyer forfeiting the property and giving up all monies paid to the seller for the property. This extinguishes the buyer's equitable title, Nolo warns.

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