Land Contracts: Owner Financing With a Twist

In the spirit of examining ways to acquire land through seller-financing, it is time to take a look at land contracts.  The land contract is a variation of the owner-financed sale, with both mechanisms being a way for a farmer-buyer to come to terms with an owner-seller, independent of third-party bank financing or complementary to traditional financing. The primary difference between typical owner-financed sales and land contracts:  Owner-financing agreements transfer full title to the buyer, while land contracts do not.  USDA Farm Service Agency’s definition of a land contract is, “…an installment contract drawn between a buyer and a seller for the sale of real property, in which complete fee title ownership of the property is not transferred until all payments under the contract have been made.” To start, think of land contracts as conventional purchase and sales agreements with a greatly extended time period before closing—instead of signing a purchase and sales contract and then taking 30-45 days to close the deal, land contract deals can, theoretically, take 30 years.  Five to ten years is a more common time frame, which involves a regular payment schedule concluded by a balloon payment.  The assumption is that in five to ten years, the farmer-buyer will have enough time to improve his/her balance sheet and credit to come up with other financing to make the

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