Payment

• Parties to a seller-financed real estate transfer enjoy far more flexibility without the presence of a third-party lender -- you are limited only by state contract law. The contract may, for example, waive the down payment in exchange for a higher purchase price, or require equal monthly installments followed by a large "balloon payment" as the final installment. This is the equivalent of a down payment at the end of the installment period.
  
  

Title and Possession

• Under a third-party financing arrangement, either the buyer or the lender takes title to the property after the sale, depending on state law. Under a land contract, you retain title to the property until the buyer pays in full; there is no need to record a lien on the property. Possession, however, reverts to the buyer after the contract is signed. Under a land contract, you retain a right of entry similar to that possessed by a residential landlord. Except for an emergency, you may enter the property only after advance notice to the buyer. The buyer, however, must allow you access for certain purposes such as to inspect the property for damage.
  
  

Default

• Most land contracts provide that in the event of late payments, the buyer is allowed a grace period before default. If the buyer defaults, however, some states allow you to reclaim the property without foreclosure, and with no obligation to compensate the buyer for his accumulated equity. Because this arrangement frequently results in injustice, however, many states have laws that qualify a seller's right to reclaim property from a defaulting buyer. You may be required, for example, to sell the property and compensate the buyer for some or all of his equity.
  
  

State-Specific Documentation

• Different states have different documentation requirements. Some require only the land contract itself, while other states require extensive documentation. Texas, for example, requires sellers to provide the buyer with formal disclosures before the contract is signed. These include the results of a survey of the property, a list of any liens on the property and a report of the condition of the property. Failure to provide these gives the buyer the right to rescind the contract without penalty. The state may also require you to provide the buyer with periodic accounting statements listing the cumulative total of payments made to date and to deliver statutory warning notices to a delinquent buyer in advance of default.