Welcome to Creative Financing

A land contract is similar to seller financing except you don’t actually

get the legal title to the property until after you meet the terms of the

contract and pay off the balance owed to the seller. Once paid in full,

you get the deed.

In the meantime, while making payments on the land contract, you

the investor have what’s called “equitable title” to the property. This

means the owner can’t sell the property to a third party or subject

the property to a lien or encumbrance that would interfere with your

equitable interest in the property.

The way to protect your equitable title is by filing with the city or

county what’s called a “memorandum of land contract.” This is an

abbreviated legal document referencing the land contract itself. This

memorandum serves to put the public on notice of your interest in

the real property without the parties having to publicly disclose and

record the full land contract and all of its terms, including price.

So if the seller were to try and sell the property, the memorandum

of land contract would pop up in a title search, clouding title and

preventing the owner from selling.

Benefits of a Land Contract

Let’s discuss the benefits of using a land contract. First of all, just

like with pretty much all creative financing strategies, if structured

properly and under the right circumstances, a land contract is a winwin

for both the seller and you the investor. As an investor, a land contract allows you to buy a property with little to no money down, (depending on what you structure) and do it without coming up with all of the cash for the purchase and without

having to qualify for conventional bank financing, giving you the ability to do more deals. A land contract benefits the seller (if he is willing to wait to get paid in full) because he usually can get a higher price and is also able to collect interest on monthly payments.