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What is a Land Contract in Wisconsin?

When you want to buy or sell land in Wisconsin, you may generally utilize a mortgage. A mortgage is a common way to finance a property purchase. There is another option that you can use for the sale of property called a land contract. A land contract is an alternative to a typical mortgage. The land contract can be used for the purchase of dwellings as well as for vacant land.

What is a Land Contract?

A land contract is a sale with a contract between a buyer and seller, where the seller finances the sale. In a land contract, the buyer agrees to make payments to the seller over a period of time. A land contract is different from a mortgage because it is a private transaction. This type of contract is made directly between two people, the one selling the land and the one buying the land. These transactions typically do not utilize a bank for financing. Instead, the buyer agrees to make payments to the seller on a regular basis.

How Does a Land Contract Work?

A land contract is often used between sellers and buyers who are related or who know each other. A person may enter into a land contract that provides them access to the property in return for making payments to the seller. It is like a lease, except the buyer will own the property outright once they complete payments. The land contract is a legal document that should include a variety of terms and conditions that provide each party with details about how the transaction is to take place.

What are the Advantages of a Land Contract?

There are some advantages to both parties in a land contract transaction. The seller does not need to make changes to the property to sell it. The seller will not need to try to list the property, find a buyer, and go through the closing process at the onset. This can eliminate some of the costs a seller might face upfront. The buyer in a land contract is able to purchase property without having to go through a bank for funding. This may be advantageous for those who are not able to obtain loans due to poor credit history or other factors. The seller and buyer may agree to specific terms that are best for both parties.

What Terms Should You Include in a Land Contract?

Land contracts are legal documents, and therefore, they must include terms that define the transaction. The contract should include the purchase price, the down payment requirement, the interest rate, a payment schedule, and prepayment options. The land contract should have a similar structure to that of a mortgage. It should include the exact monthly payment requirements and the length of the loan. It must also provide for what happens if the buyer defaults on payments. For example, if a buyer stops paying the loan, the seller has the right to take the property back.

Land contracts can be complex. If you are considering utilizing a land contract, you will want to make sure that you include the terms and conditions that protect you throughout the contract. Contact us at Moen Sheehan Meyer, Ltd. at (608) 784-8310 or online to schedule a consultation.

Published June 5, 2023
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