The Short Answer
A land contract lets you sell your house and act as the bank. The buyer moves in, pays you a down payment and monthly installments with interest, and gets the deed when the price is paid in full. Before you say yes, know this:
- You keep legal title until the buyer finishes paying. The buyer gets equitable title, the right to become the owner, plus possession.
- Interest is capped at 11% a year for most private sellers (MCL 438.31c).
- Property taxes can uncap right away, the year after you sign, not the year you hand over the deed (MCL 211.27a).
- Your own mortgage may come due, because a land contract is not a protected transfer under federal due on sale law.
- If the buyer stops paying, getting the house back takes a court case plus a redemption period of 90 days to 6 months.
A land contract is a financing deal as much as a home sale. It goes more smoothly with an attorney drafting it and a third party handling the paperwork and payments.
How a Land Contract Works in Michigan
You, the seller (or vendor), agree to sell to a buyer (the vendee) who pays you over time instead of bringing a bank loan to closing. Michigan Legal Help explains that the buyer holds equitable title, while legal title passes only after the full price is paid. The Michigan Association of Realtors calls Michigan land contracts "more akin to a mortgage than a purchase contract," because your title mainly secures the money you are owed. Under MCL 565.351, the seller's signature on the contract must be acknowledged before a notary public or a judge.
Recording a Memorandum of Land Contract
A recorded land contract has the same effect against later buyers and lenders as a recorded deed or mortgage (MCL 565.354). Most parties record a short memorandum of land contract instead, naming the parties, the date and the property but leaving out the price and terms. Michigan Attorney General Opinion No. 6319 (1985) concluded that a properly signed and notarized memorandum is entitled to be recorded.
Recording protects the buyer, but the Michigan Realtors seller financing primer warns that a memorandum that is never released can block a later sale of the house, even after a default, until it is cleared through forfeiture or a court action. Ask your attorney how it will be released if the deal ends early.
The Terms You Will Negotiate
Michigan has no standard state land contract form. Michigan Legal Help notes that the seller sets the credit requirements and the down payment, and both sides negotiate the monthly payment, the interest rate and any balloon payment.
Down Payment
The down payment is the cash you get at closing and your cushion if things go wrong. A buyer with real money in the house has more reason to keep paying. It also affects the default rules: a buyer who has paid 50% or more of the price gets a longer redemption period after a forfeiture judgment.
Interest Rate and the 11% Limit
Under MCL 438.31c(6), lenders or vendors who are not qualified as regulated lenders may make land contracts at a rate "not to exceed 11% per annum," and that 11% includes everything federal Truth in Lending law counts as a finance charge. The same section bars adding or deducting interest in advance. A separate rule lets the parties agree to any rate on a land contract of $100,000 or more secured by property other than a single family home. If you plan to charge points or fees, have your attorney check the math.
Term and Balloon Payment
Many land contracts set payments as if over a long loan but require the rest in one balloon payment after a few years, usually by the buyer refinancing. The Michigan Realtors primer uses three and five year balloon examples and warns that this only works if the buyer can qualify for a loan when the balloon comes due. A balloon can also affect which federal seller financing exemption you fit.
Taxes, Insurance and Repairs
Michigan Legal Help says most land contracts make the buyer pay the property taxes, handle repairs and carry homeowners insurance. The Michigan Realtors primer suggests settling in writing how you will see proof of taxes and insurance, whether you are named as an additional insured, what happens to insurance money after a loss, and limits on waste and major alterations.
Property Taxes, Transfer Tax and Paperwork
A Land Contract Uncaps the Taxable Value
MCL 211.27a(6)(b) lists "a conveyance by land contract" as a transfer of ownership. The State Tax Commission's Transfer of Ownership Guidelines (revised February 25, 2025) say the transfer happens on the date the land contract is entered into, and the taxable value is uncapped in the next calendar year. Recording the deed at payoff does not uncap it again.
So your buyer's tax bill can jump the year after you sign. Build that into the payment plan. See how uncapping works in Michigan and our guide to property taxes when you sell a Michigan home.
The Property Transfer Affidavit
Treasury Form 2766, the Property Transfer Affidavit, lists "Land Contract" as a type of transfer. The form says the new owner must file it with the city or township assessor within 45 days of the transfer, with a penalty of $5 a day after that, up to $200 for a principal residence or $4,000 for other property. The buyer files it, but confirm it was done.
State and County Transfer Tax
Michigan's transfer taxes fall on the seller (MCL 207.523 and MCL 207.502). A land contract under which legal title does not pass until the full price is paid is exempt from both (MCL 207.526(o) and MCL 207.505(m)), and both acts say the tax is meant to be paid only once.
The tax does not disappear. In Pinnacle Greenbriar LLC v Michigan Department of Treasury (2017), the Michigan Tax Tribunal held that the state tax attached to the deed recorded after the land contracts were paid off, based on the property's value at that time. The state rate is $3.75 for each $500 of value (MCL 207.525). The county rate is 55 cents for each $500 in a county with fewer than 2,000,000 people, and up to 75 cents in a larger county if its board authorizes it (MCL 207.504). Exemptions exist, including MCL 207.526(u) for some principal residences that have not risen in value, so ask your title company or a tax professional what applies.
Your Existing Mortgage and the Due on Sale Clause
If you still owe on the house, read your mortgage first. Most have a due on sale clause that lets the lender demand the full balance if you sell or transfer without its written consent. The federal due on sale law lets lenders enforce these clauses and lists the transfers they cannot treat as a sale on a home with fewer than five units, such as a transfer to a spouse or children, into a living trust where you stay a beneficiary, or a lease of three years or less with no option to buy. A land contract is not on that list.
Michigan adds its own rules. MCL 445.1627 requires a contract to sell a mortgaged home to state in bold print that the sale does not relieve the seller of liability under the mortgage unless the lender agrees. MCL 445.1628 allows civil fines of up to $5,000 per offense for a licensed person who knowingly helps someone evade an enforceable due on sale clause. The Michigan Realtors primer recommends that sellers notify their lender in writing and ask for consent.
There is a cash flow risk too: if your buyer stops paying, you still owe your lender every month. If you could not cover both, read our page on stopping a foreclosure in Michigan before you sign.
Federal Seller Financing Rules for Homeowners
Two sets of federal mortgage rules that came out of the Dodd Frank Act can reach seller financing. The CFPB administers both through Regulation Z.
The Loan Originator Rule
The CFPB's Loan Originator Rule compliance guide explains two exclusions under 12 CFR 1026.36(a)(4) and (a)(5) for sellers who own the property and did not build the home as a builder or contractor:
- One property in any 12 month period, for a natural person, estate or trust. The payments cannot cause negative amortization, and the rate must be fixed or adjustable only after five or more years, with reasonable limits.
- Three or fewer properties in any 12 month period, for any seller. The financing must be fully amortizing, which rules out a balloon, the rate must meet the same fixed or five year test, and the seller must determine in good faith that the buyer has a reasonable ability to repay.
The Ability to Repay Rule
Under 12 CFR 1026.43, a creditor may not make a mortgage loan secured by a home without a reasonable, good faith determination that the buyer can repay. Regulation Z generally treats a person as a creditor for home secured credit only after more than five such extensions in the preceding or current calendar year, with a lower trigger for high cost mortgages (12 CFR 1026.2(a)(17)(v)). A homeowner selling one house may fall below these counts, but that depends on your facts. A 2024 CFPB advisory opinion saying contract for deed sales generally count as credit was withdrawn effective May 12, 2025, while the regulations themselves still apply.
Get Professional Help
Have a Michigan real estate attorney draft or review the contract, the memorandum and the deed you will sign at payoff, and check your terms against the usury and federal rules. Close through a title company so title is searched and insured, and consider a loan servicing company to collect payments and track taxes and insurance. Our guide to real estate attorney fees in Michigan explains what that help involves.
What Happens If the Buyer Stops Paying
Forfeiture in District Court
Forfeiture is the faster, more common route, but only if the contract expressly provides for it, and only for unpaid money owed under the contract, not the accelerated balance (MCL 600.5726). You serve a written notice of forfeiture listing what is unpaid and when it was due, and declaring the contract forfeited 15 days after service, or a longer period you choose, unless the buyer pays and cures (MCL 600.5728). If they do not, you file in district court.
Under MCL 600.5744(4), the court cannot order the buyer out until 90 days after judgment if less than 50% of the price has been paid, or 6 months after judgment if 50% or more has been paid. If the buyer pays the judgment and costs and cures other material breaches in that time, the buyer keeps the house. The Michigan Realtors primer notes the tradeoff: forfeiture gets the house back, but no money judgment for what is still owed.
Foreclosure in Circuit Court
You can also foreclose like a mortgage under Chapter 31 of the Revised Judicature Act, starting at MCL 600.3101. Michigan Legal Help notes that land contracts cannot be foreclosed by advertisement, so this goes through circuit court. Per the Michigan courts Residential Landlord Tenant Law Benchbook, filing lets you call the whole balance due, the sale cannot happen until at least three months after filing (MCL 600.3115), and the court can enter a deficiency judgment for any shortfall. The buyer then has 6 months after the sale to redeem (MCL 600.3140). A seller who already got possession through forfeiture cannot then get a deficiency judgment by foreclosure, so the choice of path matters.
| Path | Buyer's time to redeem | Money judgment for the balance |
|---|---|---|
| Forfeiture, less than 50% of price paid | 90 days after judgment | No |
| Forfeiture, 50% or more of price paid | 6 months after judgment | No |
| Foreclosure | 6 months after the sale, which comes at least 3 months after filing | Possible, as a deficiency judgment |
The Condition of the House When You Get It Back
If the deal fails, you get the house back as it is, months after payments stopped, while taxes, insurance and your own mortgage may have kept running. The Michigan Realtors primer describes a house the city demolished, leaving a lot worth far less than the balance owed. Proof of taxes and insurance, a servicer and limits on alterations help, but do not remove the risk. If you get a house back in rough shape, see our page on selling a Michigan house as is.
Selling the Land Contract Later for a Lump Sum
If you need cash before the buyer pays off, you can sell your interest in the contract, the right to the remaining payments and the title that secures them, to an investor who takes your place. Investors usually pay less than the remaining balance, because they pay cash today for payments that arrive over years and take on the default risk. The buyer's payment history, the down payment, the rate and the house's condition all drive the price.
You can also borrow against the contract. Since 1998, MCL 565.357 has let a seller or buyer under a land contract grant a land contract mortgage on their interest, recorded like a regular mortgage (MCL 565.358). A House bill analysis of that law noted that most commercial lenders had been unwilling to lend against land contract interests. Contract clauses that restrict assignment or mortgaging still apply, so check yours.
Land Contract vs Cash Sale vs Listing
Here is how the three common ways to sell compare. Run your own numbers with our Michigan cost to sell calculator.
| Land contract | Cash sale | Listing with an agent | |
|---|---|---|---|
| Money at closing | The down payment, less your closing costs | The full agreed price, less your mortgage payoff and any costs you agree to pay | The full sale price, less commission, closing costs and your mortgage payoff |
| Monthly income | Yes, principal and interest until payoff or the balloon | None | None |
| Risk after closing | Buyer default, court time, house condition, your own mortgage coming due | Ends at closing | Ends at closing |
| Time | Close once terms are set, but you are paid over years | Set by you and the buyer, with no lender approval | Time on the market plus the buyer's loan process |
| Who handles repairs | Usually the buyer during the contract, you if you take the house back | Usually the buyer, as is | Usually you, for showings and inspection requests |
If you tried listing and the house is sitting, our guide to why Michigan houses are not selling explains what rates and inventory are doing to buyers.
Frequently Asked Questions
Who owns the house during a Michigan land contract?
You keep legal title. The buyer holds equitable title, the right to become the owner, and usually has possession. The buyer gets the deed after paying the full price.
What is the highest interest rate I can charge on a land contract in Michigan?
For a seller who is not a regulated lender, MCL 438.31c(6) sets the limit at 11% a year, including finance charges as federal Truth in Lending law defines them. Different rules apply to regulated lenders and to some large deals on property other than a single family home.
Do property taxes go up when I sell on a land contract?
Often, yes. MCL 211.27a treats a land contract as a transfer of ownership, so the taxable value is uncapped the year after the contract is signed. Delivering the deed at payoff does not uncap it again.
How long does it take to get my house back if the buyer stops paying?
After a forfeiture judgment, the buyer has 90 days if they paid less than 50% of the price, or 6 months if they paid 50% or more (MCL 600.5744). In a foreclosure, the sale comes at least 3 months after filing and the buyer then has 6 months to redeem (MCL 600.3140). Notice periods and court scheduling add more time.
Can I sell on a land contract if I still have a mortgage?
You can sign one, but your lender may be able to call the loan due under a due on sale clause, and federal law does not protect land contract transfers. You also stay liable on your mortgage unless the lender agrees otherwise. Talk to your lender and an attorney first.
Is a land contract or a cash sale right for me?
A land contract can suit a seller who owns the house free and clear, does not need the money soon, and is comfortable managing a buyer for years. A cash sale suits a seller who wants all the money at closing and no risk after it. Compare your actual net from each before you decide.
If You Would Rather Have All Your Money Now
A land contract is a real option, and for some sellers it is the right one. If you would rather walk away at closing with no monthly payments to chase and no landlord style risk, a cash sale is the simpler path. Offer Now Michigan is a BBB accredited, family owned company that buys Michigan houses for cash, in any condition, as is, with no repairs or cleaning out. We give you a written cash offer within 24 hours, charge no fees or commissions, pay the closing costs, and you choose the closing date. Every sale closes at a licensed Michigan title company.
Put our number next to a land contract offer and see which leaves you better off. Learn how to sell your house fast in Michigan, or call us at 810-425-5961.
Get a Written Cash Offer to Compare
Sources
- Michigan Legal Help, An Overview of Land Contracts.
- Michigan Association of Realtors, Seller Financing primer, 2009.
- Michigan Legislature, Land Contracts act: MCL 565.351, MCL 565.354, MCL 565.357 and MCL 565.358.
- Michigan Attorney General, Opinion No. 6319, November 1, 1985, on recording a memorandum of land contract.
- Michigan Legislature, MCL 438.31c, interest on mortgage loans and land contracts.
- Michigan Legislature, MCL 211.27a, taxable value and transfer of ownership.
- Michigan State Tax Commission, Transfer of Ownership Guidelines, revised February 25, 2025.
- Michigan Department of Treasury, Form 2766, Property Transfer Affidavit, revised March 2025.
- Michigan Legislature, State Real Estate Transfer Tax Act, including MCL 207.523, 207.525, 207.526 and 207.532.
- Michigan Legislature, County Real Estate Transfer Tax Act, including MCL 207.502, 207.504 and 207.510, and MCL 207.505.
- Michigan Tax Tribunal, Pinnacle Greenbriar LLC v Michigan Department of Treasury, Docket No. 15 006908, Final Opinion and Judgment, September 29, 2017.
- U.S. Code, Title 12, Chapter 13, preemption of due on sale prohibitions.
- Michigan Legislature, MCL 445.1627 and MCL 445.1628, due on sale clauses.
- Consumer Financial Protection Bureau, Loan Originator Rule Small Entity Compliance Guide, section 3.5, and 12 CFR 1026.36.
- Consumer Financial Protection Bureau, Regulation Z, 12 CFR 1026.43 (ability to repay) and 12 CFR 1026.2 (definition of creditor).
- Consumer Financial Protection Bureau, advisory opinion on contracts for deed, August 13, 2024, and the Federal Register notice withdrawing it, May 12, 2025.
- Michigan Legislature, Revised Judicature Act: MCL 600.5726, MCL 600.5728, MCL 600.5744 and MCL 600.3140.
- Michigan courts, Residential Landlord Tenant Law Benchbook, chapter 7, Judicial Foreclosure of Mortgages and Land Contracts.
- Michigan House of Representatives, bill analysis on land contract mortgages, 1997 to 1998 session.