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DEFINITION of 'Land Contract'. An agreement between a buyer and seller of property in which the buyer makes payments toward full ownership (as with a mortgage), but in a land contract, the title or deed is held by the owner until the full payment is made. land contract can be thought of as a lease with an option to buy. Certain states have more generous legal rights for land contract holders than others. As a result, the world of land contracts can be difficult to navigate.
When selling a home on land contract the seller acts as the private lender. The buyer provides down payment and makes monthly installment payments to the seller for an agreed upon period of time at an agreed upon interest rate. Usually land contracts are done on a 3 â 5 year balloon.