12/08/2017
Why Would Someone Choose to Sell Real Estate Using a Land Contract?
There are several reasons someone might choose to sell real estate using a land contract. Here are just a
few of the most popular:
• A land contract may make the property easier to sell. Since the seller is the qualifying agent and
controls the stipulations of the contract, the seller may set their own requirements for the credit
worthiness of the buyer, the amount of the down payment or any other item that might typically be
dictated by a bank or some other 3rd party. And, because the seller is setting the terms and
conditions, they can establish payments that fit within the buyers budget and utilize the option of
accelerating the loan through a balloon payment at some future date.
• There are tax advantages using the installment sale method, as well. Taxes from the sale of a
property are usually computed on an income-minus-basis method. With an installment sale, the
taxable income can be spread out over a number of years instead of taken in the year of the sale.
In other words, you can avoid paying all the capital gains tax at once.
• The seller on a land contract can enjoy a regular cash flow without the headaches of managing
rental property.
• The seller may be able to realize a greater overall profit from the sale by earning interest. The
seller may charge interest up to 11%. (And, in some cases an even higher rate of interest.)
