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One important requirement is that all contracts for purchase or sale of real estate must be in writing. An offer made and accepted in a phone call or conversation is not enforceable. The buyer in a FSBO process should be prepared to make an offer in writing.

A promissory note is a document between the lender and the borrower in which the borrower promises to pay back the lender, it is a separate contract from the mortgage. The mortgage is a legal document that ties or "secures" a piece of real estate to an obligation to repay money.

Benefits of Using Land as Collateral for a Loan The lenders can seize the land if the borrower does not pay on the loan and use the land to pay off the remaining balance. Due to the lower risk, loans that use land as collateral are often easier to obtain than unsecured loans, even for those with lower credit scores.

As a type of specialty home financing, a land contract is similar to a mortgage. However, rather than borrowing money from a lender or bank to buy real estate, the buyer makes payments to the real estate owner, or seller, until the purchase price is paid in full.

As a home buyer, you can back out of a home purchase agreement. However, with no contingencies written in the contract, you may face costly consequences such as losing your earnest money deposit.

In a land contract, the home seller acts as the lender instead of a bank. The seller and the buyer agree to terms. Since there are far fewer restrictions and rules governing land contracts, it may be easier to buy a home with a land contract, but you also have fewer consumer protections.