How Do Land Contracts Work in Michigan

If you`re considering buying or selling real estate in Michigan, you may have heard about land contracts. Land contracts can offer a unique opportunity for both buyers and sellers, but it`s important to understand how they work before diving in.

What is a Land Contract?

A land contract, also known as a contract for deed, is a type of seller financing. Essentially, the seller acts as the lender and finances the sale of the property to the buyer. Instead of obtaining a mortgage from a bank or other lender, the buyer makes payments directly to the seller over an agreed-upon period of time.

How Does a Land Contract Work?

When a buyer and seller enter into a land contract, they agree to a purchase price and terms for payment. The buyer typically pays a down payment upfront, and then makes regular monthly payments to the seller over a period of years. The seller retains legal ownership of the property until the buyer has paid off the entire purchase price, at which point the seller transfers ownership to the buyer.

Why Would Someone Choose a Land Contract?

For buyers, a land contract can provide an alternative to traditional mortgages. Buyers with poor credit or those who are self-employed may not qualify for a mortgage, but could still be able to purchase a property through a land contract. Land contracts can also offer more flexible payment terms than traditional mortgages.

For sellers, a land contract can provide a way to sell a property quickly and easily. The seller doesn`t have to go through the process of listing the property with a real estate agent, and can offer financing to buyers who may not be able to obtain a traditional mortgage.

What are the Risks?

While land contracts can be beneficial for both buyers and sellers, there are some risks to be aware of. One major risk is that the buyer could default on their payments, leaving the seller with the property and no way to recoup their investment. Additionally, the buyer may not be able to obtain a traditional mortgage when it`s time to refinance the land contract, potentially leaving them trapped in a contract with unfavorable terms.

It`s important for both parties to seek legal advice and thoroughly understand the terms of the land contract before entering into an agreement.


Land contracts can be a valuable tool for buying and selling real estate in Michigan, but they should be entered into with caution. Understanding the risks and benefits of a land contract is key to making an informed decision. If you`re considering a land contract, be sure to seek the advice of a legal and financial professional to ensure that it`s the right choice for your situation.