How to Cancel Out a Land Contract

by Jane Meggitt, Demand Media Google

    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.

    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.

    Seller Cancellation

    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.

    Buyer Cancellation

    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.

    About the Author

    Jane Meggitt has been a writer for more than 20 years. In addition to reporting for a major newspaper chain, her work has appeared in "Horse News," "Suburban Classic," "Hoof Beats," "Equine Journal" and other publications. She has a Bachelor of Arts in English from New York University and an Associate of Arts from the American Academy of Dramatics Arts, New York City.