• A land contract is an unconventional means of selling real estate in which the property is transferred without the participation of a third-party lender, and the buyer pays for the purchase in installment payments. This type of agreement is generally considered favorable to the buyer and unfavorable to the seller. Nevertheless, there are circumstances in which this type of transaction can make sense for a seller.
  
  

Possession and Title

• The typical land contract offsets the seller's insecure financing by allowing the buyer to take possession of the property immediately after the first installment payment clears, but defer taking title to the property until the last payment is completed. The contract should specify that if the buyer defaults on payments, the seller is entitled to take possession of the property without resorting to foreclosure proceedings and that, in this event, the buyer will be entitled to compensation equal to the difference between payments already made and the reasonable rental value of the property while the buyer was in possession of the property. The exact dollar value of the rental value should not be specified, because rental values change over time.
  
  

Payments and Penalties

• Most land contracts are entered into with buyers who cannot secure bank financing and cannot afford a large down payment. One way to offset the liability for the seller is to specify equal monthly payments with a large "balloon" payment as the final payment, without which title to the property will not be transferred. The total sales prices should be listed along with the interest rate.
  
  Default provisions should be simple and unambiguous to avoid disputes and to make it easy for courts to enforce. Penalties for late payments may be included, but should not exceed the seller's anticipated damages in the event of late payment, so that courts will not interpret it as an unenforceable "punitive damages" clause.
  
  

Housekeeping Provisions

• The property should be clearly described. A street address is not enough, because plots of land are sometimes subdivided and new addresses assigned. A description of the property on the title deed or on file at the local land recorder's office should be sufficient (both of these descriptions will likely use the metes and bounds method). The date of the title transfer (closing) should be listed, along with a statement that the contract will terminate upon the transfer of title. Finally, standard contract "boilerplate" provisions should be added (dispute resolution and contract assignability, for example), and a signature line with a space for a notarial seal and signature should be added.