When a Property Is Sold under an Agreement of Sale (Land Contract)

When a property is sold under an agreement of sale, it is also known as a land contract. In this type of agreement, the buyer agrees to make payments to the seller over a certain period of time, usually several years, until the full purchase price is paid off.

While this can be an attractive option for both buyers and sellers, it is important to understand the details of the agreement before entering into it. Here are some key things to know about buying or selling a property under an agreement of sale:

1. The buyer does not own the property until the full purchase price is paid off.

Under an agreement of sale, the buyer does not receive the deed to the property until the full purchase price is paid off. This means that the seller retains ownership of the property until that time.

2. The buyer is responsible for property taxes and insurance.

Even though the buyer does not own the property, they are still responsible for paying property taxes and insurance. This is because they have a vested interest in the property and want to protect it from any damage or loss.

3. The seller may still have a mortgage on the property.

It is possible for the seller to have a mortgage on the property even after they have sold it under an agreement of sale. This means that they will still be responsible for making mortgage payments even though they no longer own the property.

4. The buyer may be required to make a down payment.

In some cases, the buyer may be required to make a down payment at the time of purchase. This can help to ensure that the buyer is committed to making the payments over time.

5. The agreement of sale may include a balloon payment.

A balloon payment is a large payment that is due at the end of the agreement of sale. This payment is typically much larger than the other payments made during the term of the agreement and is used to pay off the remaining balance on the purchase price.

In conclusion, buying or selling a property under an agreement of sale can be a great option for both parties. However, it is important to understand the details of the agreement before entering into it. Working with an experienced real estate attorney can help ensure that all aspects of the agreement are properly drafted and understood by both parties.