What is a Land Contract?

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Many people get excited about buying or selling properties, whether to use them as primary residences, secondary homes, income opportunities, or business hubs. Unfortunately, it takes more than a handshake to transfer real estate ownership, and there are many different types of setups used to complete the process — like traditional mortgages or rent-to-own agreements. 

There are other options available, however, and that includes land contracts. This guide will discuss everything you need to know about such contracts, how they differ from traditional methods of transferring real estate ownership, and why they may be the best option for you when buying recreational land or the like.

What Do I Need to Know about Land Contracts?

Today, There are many ways to transfer property rights when you want to buy or sell a home. Most homeowners are aware of the traditional mortgage or even rent-to-own options, but not many people understand how these methods compare to a land contract. Here are a few quick facts to help clear up confusions about the options:

  • Traditional Mortgages
    These are structured to allow the mortgagor to borrow on a variable or fixed interest rate and make mortgage payments until the loan is completely paid off.
  • Rent-to-Own Agreements
    These agreements are deals that allow you to rent a property for a specific period of time, with the option to buy before the lease runs out. The buyer must qualify for a traditional mortgage within a particular time frame, typically one to five years.
  • Land Contracts
    These are agreements between sellers and buyers pertaining to a specific piece of land. Under this type of installment sale, the seller provides the financing in the purchase and the buyer repays the loan in monthly payments. Basically, land contracts are a form of seller financing.

A land contract is similar to a mortgage, but the buyer makes payments to the seller or the real estate owner instead of borrowing money from a bank or a lender. When the full amount is paid, the legal title is transferred to the buyer by way of warranty or other deed used to convey title. The most significant difference between rent-to-own agreements and land contracts is that the seller maintains control and responsibility for the property in the former, and will be on the hook to maintain the property — including paying property taxes, insurance, and any repairs.

What is a Land Contract? 1

Who Might Opt for a Land Contract?

Land contracts can be extremely advantageous to both a seller and a buyer. Efficiency, lack of formality, and simplicity are among the top reasons individuals enter into this type of contract. Here are some other benefits for each party. 

What are the Buyer Benefits in a Land Contract?

Buyers who are interested in a specific piece of real estate for sale but cannot obtain approval for a mortgage because of their credit history can enter into a deal by land contract. This means: 

  • The buyer is able to make the same types of payments as a traditional mortgage.
  • The buyer does not need third-party financing to be able to purchase a home.
  • The buyer pays monthly installment payments directly to the seller. 

The main advantage of a land contract for a buyer is that it is easy to qualify for — a seller just needs to agree to the setup. As an added bonus, a buyer does not need to go through a complicated foreclosure process if he defaults. Instead, the seller simply retains the property. 

What are the Seller Benefits in a Land Contract?

Under a land contract, a seller does not receive the full purchase price upfront, but can get many other monetary benefits. Under a land contract, the seller can:

  • Negotiate a higher purchase price on the property.
  • Require a larger down payment.
  • Enjoy a steady cash flow like with a rental property without the hassle of managing one. 
  • Avoid paying capital gains taxes all at once.
  • Have the taxable income be spread over a period of time. 

In addition, if negotiated correctly, the seller can also gain a more significant overall profit due to a higher interest rate.

How Does a Land Contract Work? 

Land contracts are typically referred to as contracts for deed or installment contracts. They are a security agreement between a seller (vendor) and a buyer (vendee).

Under a land contract:

  • The vendor will agree to sell real property by financing the purchase for the vendee. Such contracts for deed are less costly to execute, as there are no origination fees, closing costs, or formal applications. 
  • The vendor retains the legal title, and the vendee receives an equitable title. This differs from a more traditional deed of trust in that the title to the property passes to the vendee at the point of sale. 
  • Note: Under a traditional deed of trust, the vendee signs a promissory note and promises to pay back the trust deed while the property title is placed in a trust with a third party. If the vendee does not make their note payments, the ownership of the property will be transferred to the lender. 
  • The financing involved in land contracts can include an existing mortgage balance or the property can be free and clear. 

Once all the payments are made, the vendor hands the vendee the deed to the property. 

Making a Land Contract Work For You

While these land contracts can provide parties with numerous advantages over a traditional mortgage, there are still many risks involved with this process. They can be an excellent option for both buyers and sellers, but their complexities and specific real estate laws can make them challenging to execute. The terms of the contract need to be carefully discussed and examined before anything is decided, too, which means you may want to speak with a professional team of experts before you make any commitments.

If you are interested in a land sales contract as part of your real estate transaction or would like more information about the process, the perks for buyers or sellers, or what you need to know to properly execute one, contact Nomadic Real Estate today! Our qualified experts can walk you through any land contract agreement questions you might have and help you decide if one is the best option for you.

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Your portal includes a selection of extremely useful reports. Reports are available in the “Reports” section, and are distinct from the financial statements. Unlike financial statements which are static records, Reports are dynamic real-time records that will update with current data every time you view them. 

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Navigate to the "Reports" module in your portal:

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Enhanced Rent Roll Report
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Income Statement by Month Report
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The Documents area contains monthly financial statements:

Owner Portal Documents
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Download a statement to see month and YTD financials:

Owner Portal Property Statement

You'll also find a month-over-month operating statement:

Month over Month Statement

Portal Communication Tool

You can use your owner portal to communicate with our team. Any messages you send through the portal will go straight to your Account Manager. When we reply, you’ll get an email notification and you’ll also see the message in your portal next time you log in. 

Here’s an overview of using the communication platform:

Click "Communications" and navigate to "Conversations":

Commincation Dashboard Screenshot
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Click the "New Message" button and send your message:

Owner Portal New Message Screenshot

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Portal Conversation Response Screenshot
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Owner Portal Comment

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Portal Conversation Snapshot

Understanding the Ledger

Your portal includes a ledger with all transactions. The ledger is populated with data in real-time as transactions flow through our accounting software. Much of this information is also available in the Reports area, as well as the Statements in your Documents library, but the ledger is the most comprehensive resource for diving into the details. 

Please scroll through the sections below to get a better understanding of how to interpret the ledger. 

By default, transactions are sorted chronologically:

Owner Ledger Dates
  • The date reflected in the lefthand column is the actual transaction date, not the “bill date”. This is the date the transaction was actually processed. 

If you have multiple properties with Nomadic, you'll see the address for each transaction in the "Location" column:

Ledger Property Column
  • You can filter the ledger to look at just one property, all properties, or specific sets of properties. 
  • If you only have one property with us, you’ll just see the ledger for that property. 

The Description column displays the transaction type:

Owner Ledger Description Column
  • BILL: this is an expense transaction, such as for repair costs or management fees.
  • CHARGE: this is a transaction  billed to the tenant, most typically a rent payment. 
  • NACHA EXPORT: this is a credit we processed to your distribution account. This type of transaction is how you get paid! 

The Amount column shows the dollar value of each transaction:

Owner Ledger Amount Column
  • Positive Amounts: if an amount is positive, it reflects a transaction that is payable to you. Typically, this will be a rent payment that we collected from your tenants. On occasion, a positive number could also signify a journal entry or credit adjustment. 
  • Negative Amounts:  if an amount is negative, this is a transaction that is either payable to Nomadic or is an amount that has already been paid to you. Typically this will be for repair costs or management/leasing fees. Owner draws (net distributions into your checking/savings account) also reflect as negative amounts, since they have already been paid to you. 

The Account Balance column shows a sum of positive/negative transactions at a given point in time:

Owner Ledger Account Balance Column
  • Account Balance should always equal zero after a net distribution has been processed. When the balance is zero, this means that all expenses have been paid and you’ve received the remainder as net operating income, leaving a balance of zero (meaning: no one is due any money, as all funds have been distributed appropriately). 

Navigating the Propertyware Owner Portal

Your portal includes some extremely useful features that help you understand your property’s financial performance at a new level, with real-time transparency into every transaction.

Scroll through the snapshots below for an overview of portal navigation! If you need more help or have specific questions about using the portal, you can reach out to your Account Manager any time for a screen share. 

You can filter all info by date range or property:

PW Portal Filters

View a snapshot of income and expenses on your dashboard:

PW Owner Dashboard View

See every transaction in real-time on your ledger:

Owner Portal Ledger View

Statements and forms will be posted to your documents library:

Owner Portal Document Library

View a suite of real-time financial reports:

Portal Reports View

See a running list of all bills, and drill down for more detail:

Owner Portal Bills View

Under Bill Details, you'll find dates/descriptions/amounts and more:

Portal Bill Details

You can also communicate with your Account Manager through the portal:

Owner Portal Communication Tools

How do net distributions work?

Net distributions keep your accounting clean and simple. Each month we’ll collect rent from the tenants, deduct any repair expenses for the previous month and any management/leasing fees for the current month, and credit the remaining net operating income to your account. 

Net Distribution

You’ll receive a statement via email each time a net distribution is processed, and can view all transaction details in your Propertyware owner portal.