If you need to cancel a land contract, whether you are the buyer or the seller, it's important to speak with your attorney. Laws and terminology vary by state. What's called a land contract in one state is called a privately-held mortgage or deed of trust in another. In general terms, a land contract means an agreement between a buyer and seller on a house, but the seller doesn't change the title until the buyer fulfills the contract.
Whatever term is used, a land contract typically takes place when the buyer can afford monthly mortgage payments but doesn't have the cash for a down payment on the property. The buyer might not be creditworthy enough to qualify for mortgage financing from a traditional lender. In this case, the seller might "take back" the mortgage, meaning he provides the financing. The contract usually states that the seller transfers ownership after the buyer pays the seller the entire purchase price. Usually, the buyer makes a small down payment and then pays the seller monthly, with interest, on the mortgage. Since this is a private contract, it offers both parties more flexibility than loans falling under bank regulations.
Everything depends on the terms of the contract, as well as state law. Depending on the contract, if the buyer misses a payment but becomes current within a short time frame, it's unlikely the buyer risks losing the property. If the buyer isn't current with payments, the seller might file a forfeiture claim. The buyer must receive notice from the seller before this action commences, with a given time period to fulfill her part of the contract, including paying the balance of the loan. If the buyer doesn't fulfill her part, the seller can either foreclose on the property or begin eviction proceedings. Which action the seller takes depends on how long the buyer has made payments and the percentage of payments left on the balance.
If the buyer has made all payments and fulfilled his part of the contract, he might file a legal action, forcing the seller to turn over the deed. The buyer might also try to cancel the contract and attempt to recover payments already made to the seller. However, even if the buyer recovers the payments for the purchase of the property, he might have to pay the seller a similar amount in rent for the period of time he lived on the premises.
Get Legal Help
Whether you're the buyer or the seller, trying to cancel a land contract can turn into a big, expensive mess. If you must take this route, research the laws in your state to find out what you can and can't do. Also read your contract very carefully, as there might be provisions in the contract governing cancellation by either party. Contact an attorney who specializes in real estate law.
- Ohio State Bar Association: Land Contracts Provide Financing Alternative for Some Homebuyers
- Ohio Legal Services: What You Should Know About Land Contracts
- Legal Services of Northern Michigan: Land Contract Information
- Standard Legal Law Library: Land Contracts -- When and Why a Land Contract Makes Sense
- How Does a Mortgage Extension Work?
- Top Five Benefits of an FHA Streamline Refinance
- Reasons to Buy a House
- How to Calculate Annual Debt Obligations
- How to Improve Debt
- How Much Cash on Hand Can You Have During a Bankruptcy?
- How Much of Your Monthly Income Should Be Set Aside for Repairs When Buying a Home?
- How to Finance an Expensive Condo
- What Will a Mortgage Holder Do When You Are Late on a Forbearance?
- 1st Home Checklist