Do You Need a Land Contract in Michigan?

Standardized Legal Documents Do You Need a Land Contract in Michigan?

Land Contract in Michigan—Secure a Home Without a Mortgage

The most traditional way of entering into a real estate purchase agreement is by borrowing money from the bank or another lending institution—but what if you can’t afford to do that?

Land contracts are a popular way of buying residential property without securing a mortgage. Lease agreements and rent-to-own contracts are the other two alternatives.

If the intricacies of legal documents make your head spin, read on to learn what land contracts are and whether it’s in your best interests to use them to buy or sell a home.

What Are Michigan Land Contracts All About?

Michigan land contracts aren’t too different from similar documents in other states.

A land contract is an official agreement between a private seller and a buyer of the residential property. Land contracts are used to sell or buy:

  • Houses
  • Vacant land
  • Commercial properties
  • Apartment buildings

The practice is that the seller of the property lends money to the buyer. This is called seller financing.

When the two parties enter into the agreement, the buyer doesn’t get the legal title of a real property right away. Instead, they obtain equitable title, which means that the buyer has an interest in the property, preventing the private seller from selling the real property to a third party.

The seller transfers full ownership to the buyer only when they pay off the total amount of the purchase price. The period during which the buyer pays installments and interest rate usually lasts from two to four years.

When negotiating the terms of a land contract, the parties agree upon the amount of:

  • Down payment
  • Interest rate
  • Monthly payments
  • Balloon payment the buyer needs to cover at the end of the agreement

What if the Buyer Breaches the Land Contract?

If the buyer fails to meet the terms listed in a land contract, the seller can:

  1. Forfeit the contract
  2. Foreclose on the home

What Is a Forfeiture Clause?

When the buyer fails to make the payment in installments, the forfeiture clause in the contract allows the seller to cancel it. Usually, sellers will issue a forfeiture notice to buyers in person or by mail.

The buyer usually has 15 days to deliver the unpaid installments, or they would have to move out. Even if the buyer agrees to give up the home, the seller can go to court if there are any payments due. 

What Does Foreclosure Mean?

An alternative to forfeiture is foreclosure. If the buyer doesn’t make due payments, the seller can accelerate all of the contract’s due payments. They can only do that if their land contract has an acceleration clause.

When the seller gives a foreclosure notice to the buyer, they give the buyer a specified due date to cover all the due payments. If this deadline isn’t met, the seller can accelerate the total contract amount, asking the buyer to pay a total purchase price within several months.

Michigan Land Contract Laws

If you are entering into a land contract in Michigan, you should note that the interest rate cannot be over 11%. You can negotiate this percentage with your partner during the period the contract is valid, but it can only be 11% or less.

Another point to keep in mind is that the buyer of the property is responsible for:

  • Repairs
  • Property taxes
  • Homeowners insurance

Land Contract Homes for Sale—Pros and Cons

Check out the table below to see what significant benefits and drawbacks for both parties are when signing a land contract:

Land Contract Pros and Cons

Advantages for the buyer

  • Opportunity to buy property without a mortgage
  • Ability to negotiate the terms with the seller
  • Chance to own the title to the property when the contract ends

Disadvantages for the buyer

  • Excessive balloon payment
  • Risk of being unable to honor the terms over time
  • Danger of eviction and legal dispute

Advantages for the seller

  • Freedom to set the terms of the contract
  • Chance to sell undesirable property
  • Consistent revenue through installments

Disadvantages for the seller

  • Buyer’s failure to honor the terms
  • Loss of revenue in case of forfeiture
  • Inability to secure the purchase if mortgage on the property is still owed

Land Contract in Michigan—How DoNotPay Saves the Day

Buying or selling property is a tremendous step to take, and you shouldn’t make any decisions before you have a land contract drawn up. What if you can’t afford to write the agreement with the help of a lawyer? Not to worry— is here to help you out.

DoNotPay has a neat feature that can generate many legal documents for you without a bother. All you need to do is:

  1. Access your account in any
  2. Provide the name of the contract you want DoNotPay to generate
  3. Answer the chatbot’s questions to get a personalized contract template

Without having to spend extensive time and boundless energy on drawing up contracts, you can use DoNotPay to create:

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