What is my liability with land contract?

Hello, everyone!

I was approached by a potential buyer for a duplex we have; he would like to do owner financing. We own the property free and clear, no mortgage or other liens on the proprty. It would be preferable to us if we could get it off the books prior to renovating it and trying to flip it or rent it out. I have never done a loand contract before, so I have questions and concerns.

If I remain the title holder, what are my legal liabilites? Let’s just say someone gets hurt on the property… aren’t I the one who is ultimately liable in case a legal issue were to arise?

We have other investment properties, and we considered forming an S Corp and putting all of the properties in its name. We want to protect our personal home and accounts if God forbid something were to happen. Perhaps we could incoprorate prior to the sale and have the company be listed as the title holder?


In land contracts you will remain owner of title, but the buyer is taking on the responsibility of ownership. A land contract is a sale of your property so you will no longer be the owner. You just retain title until certain terms are met. Legally the will become the owner of the house, which means it is very important that they maintain their own insurance.

As owner of title you can request to be contacted if the insurance is ever discontinued so you can escrow it for the buyer and demand payments for your fee. Failure to maintain escrow will be grounds for contract termination, only you might have to foreclosure to remove them from any interest they may have.

In today’s “subprime mess” mortgage market, investor financing has become very difficult.
Therefore, a land contract is great financing tool in this economic climate, whereby the seller (My LLC) and buyer agree upon the sale of a property under installment payments. The property remains titled in the seller’s (My LLC) name until the buyer completes all payments under the contract.

Now, for my question… let’s say my buyer’s loan terms are Interest Only/ 30 yr. fixed/ 3 yr. balloon with a 5% down payment.

This is where my question rises. Upon approaching the balloon date (months before the date), does my buyer apply for a refinance loan? Or does he or she apply for a standard loan?

In this manner, my buyer can cash me out.

they already have ownership in the property so they will refinance. i would think in your land contracts you are using a note. some banks allow renters to refinance out of their lease purchase agreement.