INVESTMENT STRATEGY
LAND SALE CONTRACTS
Understanding Land Sale Contracts THIS FORM OF SELLER FINANCING CAN BE AN APPEALING ALTERNATIVE TO A TRADITIONAL MORTGAGE IN SOME INSTANCES.
By Bruce Kellogg
land sale contract is a version of the purchase and sale agreement commonly used in real estate transactions, with some important differences. It has been around a long time, probably more than 100 years, but its use increased in the 1970s when institutional lenders began including “due-on-sale” clauses in their notes and security instruments (i.e., deed-of-trust, or mortgage). As a result, the Garn-St. Germain Act of 1982 (12 U.S. Code 1701j-3-Preemption of Due-on-Sale Prohibitions) was passed. Under the definitions it says: “(1) the ‘due- on-sale’ clause means a contract provision which authorizes a lender, at its option, to declare due and payable sums secured by the lender’s security instrument if all or any part of the property, or an interest therein, securing the real property loan is sold or transferred without the lender’s prior written consent.” The land sale contract has important uses and benefits, which are discussed below. CHARACTERISTICS Essentially, a land sale contract is a way to buy and sell real estate without involving a bank or third- party lender. Under the land sale contract, the seller, called “vendor,” retains title to the property; the A
32 | think realty magazine :: may – june 2023
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