A land contract is an “as-is” agreement between a buyer and a seller, where the buyer makes payments to the seller for a property over a period of time until the full purchase price plus interest and any applicable fees have been paid. In a land contract, the seller retains the legal title to the property until all payments have been made, and the buyer has the right and requirement to occupy, maintain and use the property throughout the life of the contract, unless the contract is forfeited by a judge or canceled privately between the parties. The deed for the property is transferred to the buyer after all payments have been made and all debts have been cleared.

A land contract becomes a binding agreement and a financial commitment after it’s signed. For this reason, a buyer should agree with the Land Contract terms before signing, and check the financial terms carefully to see that the Land Contract agreement is written according to their expectations.    

* A buyer should inform themselves about standard land contract practices in the state of Michigan, and seek assistance of an advisor or professional when considering a land contract.

° Down Payment: A down payment must be paid in full to complete the signing.

°  Loan payments: Usually monthly, “loan payments” in the land contract refer to a combination of principal and interest due each separate pay period. A pay period is typically a month but could vary.

°  Payments made each pay period: Would include “the loan payment” as described above +  possible “fees” (like late fees if applicable) or possible debts that the Buyer is responsible for such as blight fines.

°  Contract term length: Every contract has a term length defining the number of payments and the amount for each payment. The actual length of time it takes to pay off the loan defined in the contract could be shorter or longer than what’s written based on Buyer paying behavior. Early payments are allowed and will shorten the time necessary to pay off the loan. Late or partial payments and associated fees, may lengthen the time a Buyer needs to pay off the loan.

°  Transfer of deed: The signing of deed transfer documents may be scheduled after all debts have been paid, and all relevant issues between Buyer and Seller have been settled.

°  The total amount paid by the Buyer: This will be a combination of the down payment + the loan amount (principal) + interest (the percent being charged for the principal loan) + any fees or unpaid homeowner related debts incurred by the Buyer over the course of the contract. A Buyer (you) may reduce the amount of interest paid and the length of the contract by making early payments and by paying more than the required contractual amount from time to time.

°   No balloon payments. Unless otherwise agreed between the parties, there shall be no balloon payment in the contract. Payment terms are defined in the contract.

°  Insurance Policy for Property Structure. The Buyer is responsible for finding and paying for the property insurance. Any policy must be created with the deed holder as “primary insured” (deed holder name is on page 1 of the land contract document) and the Buyer’s name as “secondary insured”. Buyers must fulfill certain requirements outlined in the insurance policy terms, or the insurance company won’t pay out the policy if that scenario should arise. For example, properties must have functioning smoke detectors and fire extinguishers installed properly throughout the home. If there’s a fire, and these things have not been properly installed, the insurance company will not issue a payment and all insurance policy money will have been wasted.

°  Repairs on the property: This is described in attachment B. As a summary, the Seller must approve of all major changes before they commence, and may need to be involved in the planning process. Always contact the Seller to discuss your plans and expect Seller involvement. The Seller will not try to prevent good or minor repairs, but must also decide (and has the right to decide) that they are beneficial, and not a threat to the structure of the property.

°   Inspections: Seller reserves the right to inspections of the property as described in attachment B. By signing the land contract, you agree to allow inspections upon request, and to coordinate with us so that such inspections may be performed.

°   Valid Agreements: Any spoken perceived agreements or promises which haven’t been stated in the land contract document, shall not be part of the Land Contract Agreement. If the Buyer believes something is missing from the agreement, they must make this known and resolve it with the Seller before signing. All parties shall be bound by the signed Land Contract. If new agreement terms are desired after the land contract has been signed, both parties must be willing and able to addend the original land contract.

(a buyer should always consult their own advisors and conduct their own research.)

° Forfeiture: After buying the home, if the buyer stops making payments, they risk losing the home by forfeiture. In that case, the down payment and any investments put into the property would be lost. Buyers must prioritize making their house payments like any other bill. Sellers typically try to work with buyers who keep up good communication, have a good payment history, and make an effort to fulfill their side of the agreement.

° Seller Mortgage: All properties listed on this site are owned fully by the seller of the property. This removes the risk of seller defaulting on their mortgage or disputes with business partners. 

° Properties Sold by Single Party Sellers: All properties found on the ValDetroit website are sold by single party sellers vs. multiple individuals. This removes the risk of complications that may arise from multi party ownership such as: divorce, death and disagreement. 

° Unpaid taxes: If taxes aren’t paid, the property can be lost to the city. Any buyer should be in the habit of monitoring their tax bill online. If something looks strange, check first with the seller to find out what’s going on. If the seller is unresponsive after a few weeks or a month, you could go ahead and pay your tax bill directly and seek professional advice.

° Properties are sold “as is”: It’s a buyer’s responsibility to inspect the property prior to sale. The seller has no responsibility to conduct an inspection, and often doesn’t even know in detail what’s wrong with a property prior to sale. Never expect the seller to pay for problems that are encountered after a contract is signed.

° Buyer is responsible for: monthly payments, maintenance and rehab, utilities, property taxes and property insurance.

° Expect most Land Contract homes in Detroit to need some repairs – either cosmetic or structural: They may often be livable but not very often rent ready. If you have good home builder skills, many sellers might be willing to work out a deal that supports you in making the necessary repairs during an introductory period.