Thinking about buying in Traverse City using a land contract? You are not alone. Seller financing can open doors when traditional loans feel out of reach, especially in a market with waterfront appeal and limited inventory. In this guide, you will learn how Michigan land contracts work, the local steps that protect you in Grand Traverse County, and the key terms to negotiate before you sign. Let’s dive in.
What is a Michigan land contract?
A land contract is a purchase where you take possession and make payments over time while the seller keeps legal title until you finish paying. You gain equitable title and the right to occupy or use the property based on the contract. When you complete the agreed payments, the seller conveys title to you by deed.
This setup differs from a mortgage. With a mortgage, you receive legal title and a lender holds a lien. Under a land contract, the seller holds legal title and your rights and remedies can be different. Because Michigan recognizes land contracts, the exact protections you receive depend on the contract language and current state law, so it is smart to have a Michigan real estate attorney review your documents.
Why use one in Traverse City?
Traverse City and the surrounding lakeshore communities attract year-round and seasonal buyers. In a market shaped by waterfront amenities and limited inventory, land contracts can appear in niche situations. They can help if you have nontraditional credit, are buying a unique property, or if a seller prefers steady income.
You still need to confirm a fair price and realistic terms. Local market context and comparable sales matter. A careful review of taxes, utilities, zoning, and environmental constraints helps you avoid surprises after you move in.
Key terms to know
- Equitable title: Your interest and right to possess the property while you make payments under the contract.
- Legal title: Ownership that remains with the seller until you complete the contract and receive a deed.
- Balloon payment: A larger lump-sum payment due at a set time. Ask whether you can refinance before this date.
- Escrow: A third party that holds funds for taxes and insurance or holds documents for delivery at payoff.
- Forfeiture: A remedy that can allow a seller to reclaim possession after default, depending on contract terms and law. Understand timelines and cure periods.
- Recording: Filing the land contract or a memorandum with the Grand Traverse County Register of Deeds to put the public on notice of your equitable interest.
- Deed on payoff: The deed type you receive when you finish paying, such as a warranty deed or quitclaim deed.
- Cure period: The time you have to fix a missed payment or other default before a remedy begins.
Local due diligence in Grand Traverse County
Title and recording
Recording your land contract or a memorandum with the Grand Traverse County Register of Deeds can protect your equitable interest against later purchasers or creditors. Discuss with your attorney whether to record the full contract or a memorandum and who pays recording fees. A full title search through a local title company helps you uncover liens, mortgages, easements, and other issues.
Zoning and land use
Confirm the property’s zoning and permitted uses. The City of Traverse City has its own zoning code, while Grand Traverse County governs unincorporated areas. If you plan changes, verify setbacks, future land-use plans, and any required permits early.
Wells and septic systems
Outside central areas, many homes rely on private wells and septic systems. Ask for septic permits and maintenance history, and order a septic inspection or percolation test if needed. Obtain well records and water quality test results through the Grand Traverse County Health Department or your inspectors.
Environmental and shoreline
Waterfront and shoreline parcels can have riparian rights questions, wetlands, and critical dune or shoreland restrictions. You may need permits from state or local agencies for certain activities. Review site-specific risks like erosion and bluff setbacks and plan for any required approvals.
Floodplain and insurance
Check if the property lies within a mapped floodplain. Floodplain status affects insurance requirements, financing, and building restrictions. If insurance is required, factor premium costs into your budget.
Access, roads, and utilities
Confirm legal access by public road or recorded easement. If the property is on a private road, review any maintenance agreements and seasonal access responsibilities, including winter snow removal. Verify utility availability and connection costs for electric, broadband, and municipal water or sewer if applicable.
Taxes and special assessments
Confirm current property tax status with the county treasurer before you sign. Ask about any special assessments and whether more are planned for water, sewer, stormwater, or road improvements. Many contracts make you responsible for taxes, so nail down how and when those payments are made and documented.
Conservation, historic, and deed restrictions
Some parcels carry conservation easements, historic designations, or private deed restrictions that limit uses. Review county records and the contract for any restrictions that affect your plans.
Surveys and older parcels
A current boundary survey can confirm acreage, reveal encroachments, and clarify easements. This is especially helpful for older or waterfront parcels where access or historic rights may be unclear.
Contract terms to negotiate
Price and payments
Define the purchase price, down payment, interest rate, amortization schedule, payment frequency, and maturity date. If there is a balloon payment, confirm timing and whether prepayment is allowed.
Taxes and insurance
Specify who pays property taxes and when. Decide whether taxes and insurance will be escrowed with a third party to avoid missed payments or lapses in coverage.
Recording and notice
Agree whether to record the contract or a memorandum. Recording gives public notice of your interest. Build clear notice and communication procedures for any default.
Warranties and title
Ask for seller assurances about clear title upon payoff, and define remedies if title defects appear. Confirm how any existing seller mortgage will be handled so your rights are not impaired.
Default and cure
Spell out late fees, cure periods, acceleration rights, and which remedies the seller may pursue. Understand whether a court process would be required before the seller can reclaim possession.
Maintenance and liens
Clarify who handles routine maintenance, major repairs, and improvements. Address how mechanic’s liens will be prevented or resolved if you improve the property before receiving a deed.
Assignment and resale
If you might sell or assign your interest before payoff, define whether seller consent is required and how the process works. Be clear about any fees or conditions.
Insurance requirements
Confirm the type and level of hazard insurance required and whether the seller must be named as an insured party or loss payee. If the property is in a flood zone, address flood insurance.
Deed on payoff
State the deed type you will receive at payoff and how delivery occurs, such as via escrow. A clear “payoff and conveyance” clause avoids uncertainty later.
Possession and quiet enjoyment
Define your right to occupy and make improvements during the contract term. Align possession terms with maintenance and insurance responsibilities.
Step-by-step buyer checklist
Before you sign
- Hire a Michigan real estate attorney to review or draft the contract.
- Request full title disclosures, including any liens, assessments, and seller mortgages.
- Decide whether and how the contract will be recorded and who pays the fee.
Title and survey
- Order a title search and discuss title insurance options with a local title company.
- Obtain a current boundary survey if lines, access, or setbacks are in question.
Site and structure
- Schedule a septic inspection or soil perc test and obtain well water quality tests.
- Inspect the structure for code issues and confirm permits for past improvements.
- Screen for wetlands, contamination history, or floodplain status as needed.
Financial terms
- Confirm payment schedule, late fees, and any balloon payment.
- Clarify tax and insurance obligations and whether a third party will escrow them.
- Ask whether the contract allows you to refinance with a conventional mortgage later.
Local approvals
- Verify zoning, permitted uses, and shoreline or erosion control requirements.
- Confirm utility availability and hookup costs.
Insurance
- Price out homeowner’s and, if applicable, flood insurance.
Closing mechanics
- Choose an escrow agent or title company to handle payments and documents.
- Confirm the payoff process and timing for deed delivery through escrow.
After closing
- Record the land contract or memorandum with the Register of Deeds.
- Set up tax and insurance escrows or third-party servicing to avoid lapses.
Red flags to watch
- Seller refuses a full title search or will not disclose existing mortgages.
- Seller will not allow recording of the contract or a memorandum.
- No clear cure period for missed payments or vague default remedies.
- Inability to inspect septic or well, or no records available.
- Ambiguous access, unclear private road maintenance, or unverified utilities.
Ways to reduce risk
- Work with a Michigan real estate attorney for contract drafting and review.
- Record the contract or memorandum and consult a title company early about insurance options.
- Use escrow arrangements for taxes and insurance and consider third-party servicing.
- Add inspection contingencies for structure, septic, well, and environmental issues.
- Compare seller financing with conventional financing to see which offers better protections and long-term costs.
- Ask for a covenant that the seller will not encumber the property in a way that harms your rights without your consent.
- If a deed will be held in escrow for delivery at payoff, make sure procedures are clear and secure.
How we help in Traverse City
You deserve a clear path to ownership with local insight at every step. Our team pairs lifelong Traverse City knowledge with high-touch guidance so you can evaluate land contracts confidently, from waterfront parcels to in-town homes and acreage. We help you coordinate inspections, connect with local professionals, and navigate county and city processes so your contract aligns with your goals.
When you are ready to explore options, including conventional financing alternatives, we are here to help you compare paths and protect your interests. For trusted, local representation, connect with the team at Craig Real Estate. Schedule your free consultation.
FAQs
Will I get the deed right away in a Michigan land contract?
- Typically no. The seller keeps legal title and you receive the deed after you satisfy the contract terms, so your contract should clearly state when and how the deed transfers.
Should I record my land contract in Grand Traverse County?
- Yes. Recording the contract or a memorandum with the Register of Deeds gives public notice of your equitable interest and may protect you against later purchasers or liens.
Who pays property taxes under a land contract in Michigan?
- The contract should say who pays. Many agreements require you to pay taxes, so set clear procedures and proof-of-payment requirements to avoid penalties or liens.
Can I refinance and pay off my land contract later?
- Often yes, but confirm your contract allows prepayment or refinancing and does not include terms that make it difficult, such as restrictive demand or penalty clauses.
What happens if I default on a land contract in Michigan?
- Remedies depend on your contract and applicable law. Know your cure period, late fees, acceleration rights, and whether judicial process is required before the seller can reclaim possession.
Is title insurance available for land-contract buyers in Traverse City?
- Title insurance may be available, but underwriters can impose conditions. Speak with a local title company early to understand options and requirements.
