Key Takeaways
What the document has to contain, where your state’s statute stops applying, and what to anchor the blanks to.
- A land contract is a sale agreement and a financing agreement in one, so every term a bank would put in fine print you now have to write yourself.
- Ohio requires sixteen specific provisions and recording within twenty days, which is the closest thing to a statutory checklist that exists.
- Several of those statutes are written around a dwelling, so on bare land you may have no statutory backstop at all, which makes careful drafting matter more, not less.
- USDA guarantees some seller-financed land contracts, and its terms give you real anchors: 5 percent minimum down, 20-year amortisation, and a capped fixed rate.
- The installment method applies automatically unless you elect out by your return due date, so the tax treatment has a deadline attached.
Writing a land contract means turning a seller-financed land sale into a document that holds up. It is doing two jobs at once, conveying the property and financing it, which is why it needs more care than an ordinary purchase agreement.
This covers what the document must contain, a skeleton to work from, where your state’s statute stops applying, and what the numbers in the blanks should be anchored to. If you are still deciding whether to finance the sale at all, start with owner financing on land.
Quick verdict: use a template to organise the deal, never to close it. The two clauses that decide who keeps the land in a dispute, default and title transfer, are exactly the ones that have to match your state’s law, and on bare land your state’s statute may not apply at all. Have a licensed real estate attorney in the property’s state draft or review the document before anyone signs. This is general educational information, not legal or tax advice.
What Must a Land Contract Contain?
At minimum: the parties, the property, the money, the responsibilities, default and remedies, and how title transfers.
At least one state has legislated the answer rather than leaving it to custom. Ohio Rev. Code 5313.02 requires sixteen specific provisions in a land installment contract. Among them: a statement of any encumbrances against the property, a requirement that the buyer pay taxes, assessments and other charges from the date of the contract unless agreed otherwise, and a restriction on the seller that “No vendor shall place a mortgage on the property in an amount greater than the balance due on the contract without the consent of the vendee.”
That last one is worth pausing on. It protects the buyer against the seller borrowing against land the buyer is still paying for, which is a risk that exists in every land contract and that almost no template addresses.
Ohio also requires the seller to record the contract within twenty days. Recording is not a nice-to-have there; it is a statutory duty with a deadline.
Use that list as your floor wherever you are. The property must be identified by its full legal description from the current deed, metes and bounds or lot and plat, never a street address or parcel number alone. Addresses change and markers move; the recorded legal description does not.
Does Your State’s Statute Even Apply to Bare Land?
Often not, and almost nobody tells land buyers and sellers this.
Read the definitions section before the operative section. Ohio Rev. Code 5313.01(B) defines “property” for the entire Land Installment Contracts chapter as real property “improved by virtue of a dwelling having been erected on the real property.” The sixteen required provisions, the twenty-day recording duty and the forfeiture protections all hang on that definition.
Texas Property Code 5.062(a) does the same thing differently: its executory contract subchapter “applies only to a transaction involving an executory contract for conveyance of real property used or to be used as the purchaser’s residence.”
Federal rules follow the same pattern. The consumer credit rules aimed at seller financing are keyed to credit secured by a dwelling, which is why they generally do not reach a bare land sale.
So on vacant ground with nothing built on it, you may be drafting without any statutory checklist behind you. That inverts the usual advice. A complete, carefully drafted, attorney-reviewed contract matters more on raw land than on a house, because no statute is quietly filling in the gaps you left.
Confirm with a local real estate attorney whether your state’s land contract statute reaches a parcel with no dwelling on it. This is general information, not legal advice.
Free Land Contract Template
A skeleton to organise the deal, not a document to sign. Every bracketed field is a decision to make with an attorney, not a blank to guess at.
LAND CONTRACT (CONTRACT FOR DEED)
1. PARTIES. This agreement is made on [DATE] between
[SELLER FULL NAME] (“Seller”) and [BUYER FULL NAME] (“Buyer”).
2. PROPERTY. Seller agrees to sell the real property located at
[ADDRESS], legally described as: [FULL LEGAL DESCRIPTION FROM DEED].
3. PURCHASE PRICE AND TERMS.
Purchase price: $[AMOUNT]
Down payment: $[AMOUNT] paid on [DATE]
Balance financed: $[AMOUNT]
Interest rate: [RATE]% per year, fixed
Payment: $[AMOUNT] per month, due on the [DAY] of each month
Term: [NUMBER] months, with a balloon of $[AMOUNT] due [DATE], if any
4. ENCUMBRANCES. Seller states the following encumbrances exist against
the property: [LIST OR “NONE”].
5. SELLER RESTRICTION. Seller shall not place a mortgage on the property
exceeding the balance due under this contract without Buyer’s consent.
6. TAXES, INSURANCE, MAINTENANCE. [BUYER/SELLER] shall pay property taxes
and assessments from [DATE] and maintain [INSURANCE/THE LAND].
7. POSSESSION. Buyer may take possession on [DATE].
8. TITLE AND DEED. Seller retains legal title until the balance is paid.
On final payment Seller shall deliver a [DEED TYPE] deed.
9. DEFAULT AND REMEDIES. If Buyer fails to pay within [NUMBER] days of a
due date, Seller may [REMEDY PER STATE LAW] after written notice and a
[NUMBER]-day cure period.
10. PAYMENTS AND SERVICING. Payments shall be made through
[ESCROW OR SERVICING AGENT], which shall maintain the payment record.
11. PREPAYMENT. Buyer may prepay all or part of the balance without penalty.
12. RECORDING. Seller shall record this contract with the [COUNTY] recorder
within [NUMBER] days of signing.
13. GENERAL. Entire agreement, governed by the laws of [STATE].
_______________________ _______________________
Seller / Date Buyer / Date
[Notary acknowledgment as required by state]
Clauses 4, 5 and 10 are the additions worth noticing. The first two come straight from Ohio’s statutory requirements and protect the buyer against encumbrances the seller creates. The third turns an informal payment arrangement into a documented one, which the next section shows is a federal requirement in at least one programme.
What Should the Numbers Be Anchored To?
Not to a range you read somewhere. There are published anchors, and one of them comes with a federal guarantee attached.
USDA’s Farm Service Agency runs the Land Contract Guarantee Program, which guarantees seller-financed land contracts where the buyer is a beginning farmer or rancher, or a farmer or rancher who is a member of a socially disadvantaged group. Its terms are a useful reference even if your deal does not qualify:
- Maximum purchase price: $500,000
- Minimum down payment: 5 percent of the purchase price
- Minimum 20-year amortisation with equal annual payments, balloon acceptable after 10 years
- Fixed interest for the first 10 years, capped at the FSA direct farm ownership rate plus 3 percentage points
- Guarantee period of up to 10 years
Two options exist: a Prompt Payment Guarantee covering up to three annual instalments plus related taxes and insurance on three occasions, and a Standard Guarantee covering 90 percent of the outstanding principal balance.
And FSA does not suggest third-party servicing. It requires it, an escrow agent under the Prompt Payment option or a servicing agent under the Standard one, bonded and not debarred from federal participation.
For the deposit clause in your own contract, our page on the land contract down payment sets out what actually drives the number rather than quoting a range.
For the rate clause, owner financing interest rates covers how to land on a defensible figure, including the IRS applicable federal rate that sets the legal floor on seller-financed interest.
Can a Land Contract Be Federally Guaranteed?
Yes, for a narrow set of deals, and it is worth checking before you assume a land contract is an informal arrangement.
The FSA programme above is the mechanism. The buyer must be a beginning or socially disadvantaged farmer or rancher who is the owner-operator of a family-size farm, and the seller must meet FSA’s criteria. The purchase price ceiling is $500,000.
Where it fits, the seller is carrying materially less risk than in an ordinary contract for deed, because a guarantee sits behind either the payments or 90 percent of the principal. Where it does not fit, the programme’s structure is still the best free template for a sound deal: real money down, long amortisation, a capped fixed rate, and an independent party holding the payment record.
Contact your local FSA office to check eligibility before drafting, because the guarantee requirements shape the contract terms rather than sitting alongside them.
How Is a Land Contract Taxed?
Usually as an installment sale, and the treatment applies automatically unless you act.
IRS Topic 705 defines an installment sale as “a sale of property where you’ll receive at least one payment after the tax year in which the sale occurs.” You report gain under the installment method on Form 6252 in the year of sale and in each later year of the obligation, which spreads the tax across the payment period rather than bunching it into one year.
The detail most sellers miss: the installment method is the default. To report all the gain in the year of sale instead, you must elect out by the due date of that year’s return, including extensions, reporting the gain on Form 4797 or Schedule D and Form 8949.
That is a deadline, and electing out is sometimes the better answer, for instance where you expect rates to rise or you want the transaction closed for other reasons. Take the actual numbers to a CPA. This is general information, not tax advice.
If you are structuring the wider deal rather than just the document, our guide to offer owner financing covers the full seller sequence from pricing the terms to closing.
Before any of that, it is worth confirming a contract for deed is the right instrument at all. Our comparison of land contract vs mortgage sets out who holds title under each and what happens on default.
What Do People Get Wrong?
Four mistakes, in order of what they cost.
Not recording the contract. An unrecorded land contract leaves the buyer’s interest invisible to anyone searching title. In Ohio it is a statutory duty with a twenty-day deadline; elsewhere it is simply the cheapest protection available.
Using a street address instead of the legal description. Pull the description from the current deed. This is the clause that decides a boundary dispute.
Writing a default clause that does not match the state. Forfeiture is fast, and it is not available or enforceable everywhere, and where a statute governs it the statute may not reach bare land. This is the clause to spend attorney time on.
Assuming the federal and state rules cover you. On vacant ground they frequently do not, which means the document is the only protection either side has.
Behind all four: treating a downloaded form as finished. A template organises the deal. The clauses that decide who keeps the land in a dispute are jurisdiction-specific, and no generic form gets them right for your state.
Get It Drafted, Then Find the Buyer
The contract protects the deal. It does not create one. Those are two different problems and they are solved in that order.
Once the document is right, reach owner-financing buyers directly.
If you are preparing the listing at the same time, you can sell your vacant land with the financing terms stated up front, which is what draws the buyers who need them.
Frequently Asked Questions
Can I write my own land contract?
You can draft one, but do not sign it without an attorney’s review in the property’s state. The clauses that matter most, default and title transfer, are jurisdiction-specific, and on bare land your state’s land contract statute may not apply at all. Use a template to organise the deal, then have it finalised professionally.
Does a land contract need to be recorded?
Record it. Ohio requires the seller to record within twenty days, and elsewhere recording is the cheapest protection available because it puts the buyer’s interest into the public record. Notarisation requirements vary by state and are commonly needed to record. Confirm your county’s rules before signing.
What clauses must a land contract include?
Parties, the full legal description from the deed, price and payment terms, who pays taxes and insurance, default and remedies with a cure period, and how title transfers. Ohio’s statute requires sixteen specific provisions including a statement of encumbrances and a restriction on the seller mortgaging the property above the contract balance.
Is a land contract taxed all at once?
Usually not. It generally qualifies as an installment sale, so gain is reported as payments are received, on Form 6252. That treatment is automatic unless you elect out by the due date of your return for the year of sale, including extensions. Confirm the treatment for your basis and structure with a CPA.
How detailed must the property description be?
Very. Use the full legal description from the current deed, such as metes and bounds or lot and plat, not a street address or parcel ID. The legal description is what holds up if a boundary is ever disputed, because addresses are renamed and physical markers move while the recorded description stays fixed.
Resources and Further Reading
- Ohio Rev. Code 5313.02, Required provisions of land installment contracts sets out the sixteen provisions a contract must contain and the twenty-day recording duty.
- Ohio Rev. Code 5313.01, Land installment contract definitions defines the property the chapter covers as land improved by a dwelling erected on it.
- Texas Property Code 5.062, Applicability limits the executory contract subchapter to property used or to be used as the purchaser’s residence.
- USDA Farm Service Agency: Land Contract Guarantee Program sets the guarantee options, the 5 percent minimum down payment, the 20-year amortisation and the capped fixed rate.
- IRS Topic 705, Installment Sales defines an installment sale, names Form 6252, and explains how and when to elect out.
