How Does A Land Purchase Agreement Work? (2026)

Understanding a Land Sale Contract

A land purchase agreement, or land contract, is an agreement used for seller-financed real estate purchases. It outlines the terms of a loan where the buyer makes installment payments to the seller. No third-party lender is involved.

Installment Land Contracts Explained

There are two main types of land purchase agreements: traditional land contracts and wrap-around land contracts.

Traditional Land Contracts

With this land purchase agreement, the seller holds the legal title until the buyer has paid the contract in full. The buyer gets equitable title right away, which means they have the right to use and enjoy the property even though they don’t legally own it yet.

Wrap-Around Land Contracts

With these contracts, the seller keeps paying their mortgage while accepting installment payments from the buyer. However, the buyer immediately gets a warranty deed for the property.

Importantly, this kind of land purchase agreement is only allowed if the seller’s mortgage lender agrees.

When to Use This Type of Contract

Wondering when to create a land purchase agreement? These are a few situations when you might consider using one:

• A credit-challenged buyer is having trouble qualifying for mortgages.
• A buyer doesn’t have enough for a down payment.
• Both buyer and seller want to quickly close a deal.
• A seller wants to sell a property that a lender may not agree to finance, like a house that needs major repairs.

In some circumstances, another contract may be more appropriate. For example, if you’re selling a commercial building, you might choose to create a commercial real estate purchase agreement.

Key Factors That Influence Land Pricing

Here are some of the main factors determining the price of vacant land:

• The location of the property
• The size of the parcel
• How much of the land is usable
• How easily it can be connected to utilities
• Soil quality

Mineral rights can also influence the total price. If the sale includes the right to mine natural resources below the surface of the land, for example, the purchase price may be higher.

How to Write a Land Sale Contract

A land sale contract should at least include the following:

• Identifying information for the buyer and seller
• A clear description of the property
• The total purchase price
• How the price will be paid
• Any known property defects
• Procedures for resolving disputes
• When ownership transfers to the buyer

Both parties should sign the document, and having it notarized can add another layer of security.

Need to Create a Land Purchase Agreement?

Before entering into a land contract, it’s important for both the buyer and seller to make sure the agreement protects their rights and interests. ConsumerShield can help you navigate and create land purchase agreements and other contracts. Take a look at our legal document templates and guides today.