Land Contract Information

Land contracts are commonly used in Detroit as a way to buy and sell homes without traditional financing. This website and resources are here to help inform potential land contract buyers about how to inform and protect themselves in this process, and connect them to professional resources.

Introducing the Land Contract Buyer Guide

The Land Contract Buyer Guide is a tool to equip prospective home buyers with information to protect and advocate for themselves throughout the land contract process. This guide includes information, do-it-yourself checklists, and guidance on risks for whichever part of the land contract process a buyer is in. This guide is not a replacement for real estate guidance, legal advice, or housing counseling. Accompanying the guide are one-pagers for each step of the land contract process.

 

 

 

Stage 1:

 

Stage 2:

 

Stage 3:

 

Stage 4:

 

The guide was born out of the City of Detroit’s participation in the Cities for Financial Empowerment Fund’s Local Consumer Financial Protection Initiative and a grant from the Center for Financial Empowerment.

The guide was co-authored by the City of Detroit, Enterprise Community Partners, and University of Michigan Poverty Solutions. The guide was also shaped with input and collaboration from legal experts, housing advocates, communication experts, and residents via meetings, focus groups, and listening sessions. Special thanks to the following groups  for their guidance and feedback on the contents of this resource.

 

The Detroit Housing Network  *  The Detroit Justice Center  *  Lakeshore Legal Aid  

Michigan Legal Services

Michigan Department of Insurance  and Financial Services  *  Michigan Poverty Law Program * United Community Housing Coalition

    United Way for Southeastern Michigan

What is a Land Contract?

A land contract is a real estate transaction in which the buyer pays the seller for the purchase of a property over time. A land contract purchaser is not a renter, but has partial ownership while they are making payments. The seller holds the deed until the purchase is fully paid, and the buyer has most of the other rights and responsibilities of ownership throughout the payment period. It is a legally binding agreement.

Land contracts are most often used by people who want to buy a home but cannot qualify for a mortgage or pay in cash all at once. Land contracts are also used for homes that a bank might not approve a mortgage for due to low value or repair issues. 
Land contracts can be risky because buyers have many of the costs and responsibilities of ownership while the seller still holds the deed. Compared to home buyers with a mortgage, land contract buyers have a greater burden to educate themselves, because most do not have the benefit of a bank, title company, or real estate agent to review or regulate the purchase. It is important that buyers understand their contract, verify that it is fair, and know how to fulfill the requirements of the contract. With good information, research, and resources, land contract buyers can succeed in becoming homeowners. 

The process of buying a home on land contract can be broken up in 5 stages. Buyers, review one-pagers with this information and helpful step-by-step lists for the stage you are in.
 

 

Land Contract Buying Process

1. Before Signing

 

The first stage for a buyer considering purchasing a home on land contract is broken out in two parts.

  • Researching the home:
    • Confirm ownership: Is the person selling the home the same as the official owner of record? 
    • Liens and debts: Are there liens, debts, property taxes, or water bills the new owner may owe?
    • Value of the home: Does the sale price align with the market value of the home?
    • Condition: What repairs might the owner need to make and at what cost?
  • Reviewing the land contract:
    • Confirm seller is owner: Is the person or company selling the home the owner of public record?
    • Direct costs: What costs are the buyer expected to pay to the seller, and when?
    • Indirect costs: What costs will the buyer be responsible for other than the purchase price?
    • Red flags: Are there terms or words in the contract that would make proceeding a bad idea?
       
 2. At Signing

Once a buyer has done their research, fully reviewed the contract, and decided to purchase a home on land contract, they are ready to sign. When signing a land contract, a buyer should know what to bring, what to receive, and what questions to ask. 

  • Items to bring: The buyer must bring necessary payment and identification.
  • Forms to fill out: The buyer may sign some or all of these documents: land contract, memorandum of land contract, Property Transfer Affidavit, and Principal Residence Exemption.
  • Questions: The buyer should find out who is responsible for recording and filing signed documents.
  • Take home items: The buyer should review and receive disclosure forms required by the government (Lead Disclosure, Seller’s Disclosure) and copies of all signed documents.
     
 3. After Signing

 

After a buyer signs a land contract they are on the path to homeownership. There are some immediate steps that should be taken, some that continue throughout the agreement, and some that are only relevant if issues arise.

Immediate Tasks:

  • File Documents- Record land contract or Memorandum with Register of Deeds. File property tax documents with Assessor. Pay and keep property taxes current each year. 
  • Utilities- Put utility accounts in buyer's name with DTE and Detroit Water and Sewerage Depart (DWSD). Pay and keep utilities current.
  • Home insurance- Create an home insurance policy according to the land contract agreement requirements.

Throughout the Agreement:

  • Land Contract Payments: Pay monthly to seller as agreed in Land Contract
  • Home Insurance: Keep home insurance payments current
  • Pay Property taxes: Keep property taxes current

Potential Problems:

  • Land contract forfeiture: This may arise if the buyer fails to make payments or otherwise breaches the land contract.
  • Tax foreclosure: This may arise if delinquent property taxes accumulate for three years.
  • Repair issues: This may arise if certain building systems are neglected or in the event of outside forces such as flooding, storms, etc.
     
 4. After Paying in Full

 

After a buyer has paid in full for their land contract and receives their deed, there are a few short steps to ensure all paperwork is complete and some optional steps a buyer may wish to take. 

  • Record deed: Buyer should record quitclaim or warranty deed.
  • File Property Transfer Affidavit and Principal Residence Exemption: Buyers who are not already listed as the taxpayer of record or who lack the Principal Residence Exemption may file these documents.
  • Continue paying property taxes: Homeowners are required to pay property taxes every year to the City of Detroit. Failure to do so can lead to tax foreclosure.
  • Quiet title: Buyers who have a quitclaim deed may want to "upgrade" to a warranty deed.
  • Home insurance: While buyers are no longer required to have home insurance through the land contract, they may want to purchase home insurance to protect their asset.
  • Side lot: Homeowners who live adjacent to “side lots” owned by Detroit Land Bank Authority may be able to purchase the lot for $100.
     

 

 

Help

Housing Counseling and Legal Services


Free or low-cost housing counseling and/or legal service. People who are considering buying a home on land contract are strongly recommended to speak to a counselor in advance. Buyers who are already in a land contract agreement who are facing issues can seek housing counseling or legal help.

Michigan Legal Services/United Community Housing Coalition
Housing counseling for all stages of land contract including legal representation
313-963-3310
2727 2nd Ave., #313
Detroit, MI 48202
www.uchcdetroit.org  
[email protected]

Michigan Legal Help
Self-help, online resources and information about all stages of land contracts
https://michiganlegalhelp.org/

Detroit Housing Resource Network (HRN)
Community-based nonprofits across Detroit offering free housing counseling services
www.detroithousingnetwork.org

Government Resources


Commonly-used government resources for land-contract buyers.

Detroit Taxpayer Service Center 
File PTA/PRE documents, check taxpayer information and tax assessment
313-224-3560
Coleman A. Young Municipal Center 
2 Woodward Ave., #130 
Detroit, MI 48226 
https://detroitmi.gov/departments/office-chief-financial-officer/ocfo-divisions/office-assessor

City of Detroit Office of the Treasury
Check property tax balance and pay current-year property taxes
313-224-3560
Coleman A. Young Municipal Center
2 Woodward Ave., #154
Detroit, MI 48226 
https://detroitmi.gov/departments/office-chief-financial-officer/ocfo-divisions/office-treasury

Wayne County Register of Deeds
Record documents, search public records of previously recorded documents, report fraud 
313-224-5850 
400 Monroe St., 9th Fl. 
Detroit, MI 48226 
www.waynecountylandrecords.com/recorder/web