A land contract of sale (also called a contract for deed) is an old form of transferring property used for years in bare land sales where the buyer couldn’t come up with the full purchase price in cash. The seller gives the buyer a contract to buy that states if and when the buyer ultimately comes up with all the cash, title will be transferred—no cash, no title. During that time the buyer usually can work or occupy the property.

Today, the land contract is still used by investors to purchase properties that they otherwise can’t get into, and to sell properties that they otherwise can’t get rid of.

Some of the reasons for using it include the following.
Reasons for Using a Land Contract
•  To give the buyer time to come up with the cash while protecting the seller from giving title to a property not paid for.
•  To avoid lawsuits. A buyer who is being threatened by law suits will sometimes acquire property using the land contract. Since the contract is not recorded, the buyer’s name is not on the property, and in a lawsuit that property is less likely to become involved.
• To attempt circumvention of the alienation (due on sale) clause in modern mortgages. Since the contract is not recorded, the lender may not learn about the transfer and may not demand the mortgage be paid.

This is a dangerous tact.
On the negative side, the contract of sale is often an insecure position for a buyer. If the seller of a property decides that he or she wants to be dishonest, he or she can sell it again, even after it’s first been sold to you. Since recording of title is the means by which ownership is determined, and since a contract of sale is not usually recorded, this is possible.

Today, in many states a contract of sale can be recorded if at least one party that signs it has that signature notarized. Further, some states now restrict or prohibit land contracts.