Land Contracts In Ohio
Our real estate attorneys at Neiman Law help clients in Columbus and its surrounding communities and throughout Ohio with all sorts of real estate legal matters. If your business is contemplating a land contract, our lawyers can offer counsel and advice on how best to proceed.
What Is A Land Contract?
In a land contract arrangement, also sometimes called an installment land contract, a seller promises to convey the title of a property at some point in the future. In exchange, the buyer promises to make payments over a specified time.
The seller retains the title until the terms of the agreement have been satisfied. Essentially, in a land contract, the landowner is financing the seller’s ability to purchase the property. According to Ohio real estate laws, the land must be in Ohio, and the property must contain a dwelling, home or structure.
Executing A Land Contract In Ohio
In Ohio, the parties agree on the terms of the purchase agreement, such as the purchase price, the payment terms and other details for the sale of the property. As soon as the agreement is reached and the contract is signed by both parties, the land contract is recorded and the buyer can take possession of the property.
The buyer will typically make monthly installment payments for the designated period of time until the purchase price has been satisfied. The seller retains the title to the property until the payment terms have been satisfied.
If the buyer defaults on their payments, they could forfeit their legal rights to the property and prior payments. A seller will have the option to commence forfeiture or foreclosure proceedings.
Mistakes People Make With Land Contracts
Land contracts, while offering flexibility and alternative financing options in real estate transactions, can lead to potential pitfalls if not executed with due diligence.
Here are the common missteps people make when dealing with land contracts in Ohio:
- Not outlining the details: Land contracts should include specific terms regarding the purchase price, payment schedule and any other agreed-upon conditions. Failing to specify these details clearly can lead to misunderstandings and disputes down the line.
- Not having an attorney review or draft the contract: Another mistake is not having an attorney review or draft the land contract. A qualified attorney can ensure the contract complies with Ohio laws and regulations and can help protect both parties’ interests. The attorney can also help identify any potential issues and negotiate fair terms.
- Not requesting an owner title: Some sellers may not request an owner’s title insurance policy when selling a property through a land contract. This can be a mistake, as an owner’s title insurance policy can protect against any title defects or claims that may arise.
- Not planning for the future: Buyers should consider what will happen if they cannot complete the payments on the land contract. For example, can they obtain financing to pay off the contract? Sellers should also consider their options if the buyer defaults on payments.
- Not considering financing alternatives: Buyers who cannot obtain traditional financing may consider other options, such as rent-to-own agreements or lease options, before getting into a land contract.
- Failing to address contingencies: Land contracts should include contingencies that must be met for the contract to be valid. For example, the contract may be contingent on the buyer obtaining financing or the seller making certain repairs.
It is best to carefully review and negotiate the terms of a land contract and seek the advice of a real estate attorney to help ensure the contract is fair and legally enforceable.
Using A Land Contract For Commercial Real Estate
A land contract can be attractive to commercial real estate investors for several reasons. A commercial land contract usually requires less capital investment for a down payment. This can make a land contract an attractive option when land values are high and prohibitively expensive.
Likewise, there is often less involvement with banks and lenders which makes financing a commercial land contract easier to obtain than other purchasing options. In addition, once the contract is executed and signed, the buyer can start using the property. There are also tax advantages involved with using a land contract in lieu of traditional lending and financing arrangements.
Schedule A Consultation With A Real Estate Attorney
Our real estate attorneys are available for consultation appointments. To schedule an initial consultation, contact our Columbus office by calling 614-454-3579 or by sending an inquiry through our contact form.
