Land Auctions

Many have asked us What is a Land Contract, I’ve seen this offered in some of the land auctions, and how does it benefit land buyers and land sellers.

A land contract is a legal binding real estate sales agreement between the land owner (seller) and a land purchaser (buyer)

The difference between a normal sales agreement and a land contract is that the land contract offers owner financing to the land buyer.  The land stays in the owners name, and title to the property doesn’t transfer to the new owner until the full amout of the loan is paid off in full.

This type of land sales agreement allows the land seller to to make interest from the loan, and keep the security of the title in their name, legally avoiding foreclosure proceeding necessary with a mortgage or deed of trust transfer.

Land buyers also benefit.  The purchase of land with little money down, and a land contract with no pre payment penalties, offers land buyers to highly leverage their purchasing power.  Let me explain how.

1.  Lets say you find a lot for sale by owner for $50,000, and the land-fsbo seller is asking $500 down with monthly payments of $400.   Your cash outlay for this purchase is $900

In a normal land purchase, the land seller or real estate agent will require 10% or 20% Down this would be $5,000 – $10,000 down!

For $10,000 you would be able to buy almost 9 other lots.  If you are planning to re-sell when the real estate market picks up, and profit from any appreciation, or market demand, you can see the benefit of leveraging the dollar outlay to your advantage buy purchasing property from land for sale by owners, that are offering owner financing, via a land contract sale.

Note, that when you buy land with a land contract, it is important that you make sure you are buying from the title record owner, and you should verify this by contacting a local title company, or doing your own title search.  You will need the assessors parcel number to begin with.  Calling the County Assessors office will give you the assessed owners name, and will also be able to provide you the plat map, and tract map to see the actual measurements and easements along with the roads if there are any.

So you ask, what does the land contract for look like? Here is a free land contract sample photo.  We recommend Landcontract.us that offers an electronic version for around $5, where you can easily add in the buyers name, property description and all the terms related to the land sale, and have to use for other properties your planning on selling in the future.