How am I (buyer) protected when purchasing land through seller financing?

[A.j. Silva]

I'm looking to purchase 1.9 acres in the greater Phoenix area. Seller-financing is the only option for me as my income is through my LLC which isn't older than two years. The seller is asking for $40,000 down which I am able to pay in cash. The total price the seller is asking is $195,000.

However, I've read that lands contracts can exist where I'm not given the deed to the home until the loan amount is paid in full ($155,000.) Is there a way to protect myself and recoup any of my equity  (downpayment and any construction I plan to do) if the property by chance forecloses? Even if I am deeded the title at closing, am I able to recoup any equity in cases of foreclosure? 

[Mitch Messer]

Hey @A.j. Silva, why do a land contract?

If I'm putting $40K down on a land deal, I'm getting the deed!

Also, if the property were to foreclose, it would be because you defaulted on your note! You presumably wouldn't allow that happen if you still had equity in the deal.

But, if you did lose the property to foreclosure, it would be auctioned off. Any "equity" held in the property would first go toward paying off your note balance (as you would expect).

[A.j. Silva]

@Mitch Messer Thank you–this is very helpful. This is my first real estate purchase and I'm learning what to fight for in this type of deal. That being said–I'll be sure to only move forward if I get the deed.

[Chris Seveney]

@A.j. Silva

As mentioned refuse to do a land contract, do it as a traditional note and deed of trust

If you do a land contract then you would want to make sure the land contract gets recorded in the county to show your equitable interest

[Kyle Gardner]

Reiterating what everyone is saying. Read their contract, if it doesn't accomplish what you want, get your own contract. 

[Howard Koore]

Are you folks talking about a Ground Lease which gives you long term use and control of the land,etc. but it’s never yours unless you contract to buy it.

[Howard Koore]

https://www.nar.realtor/ground-leases

[Jacob Sherman]

is there already a home on the property ? 

[A.j. Silva]

Quote from @Jacob Sherman:

is there already a home on the property ? 

No. Just utilities.