In Ohio, a land contract (contract for deed) is:
Audio Lesson
Duration: 2:43
Question & Answer
Review the question and all answer choices
Prohibited
CORRECT_ANSWER
A form of seller financing where buyer gets equitable title
The same as a mortgage
Option C is incorrect because a land contract is fundamentally different from a mortgage. In a mortgage, title transfers to the buyer immediately with the lender holding a lien, whereas in a land contract, the seller retains legal title until payment is complete.
Only for commercial properties
Option D is incorrect because land contracts are not limited to commercial properties in Ohio. They can be used for residential properties as well, particularly when buyers may not qualify for traditional financing.
Why is this correct?
Option B is correct because it accurately describes a land contract as seller financing where the buyer receives equitable title (beneficial ownership rights) while the seller retains legal title (actual ownership) until full payment is completed.
Deep Analysis
AI-powered in-depth explanation of this concept
Understanding land contracts (contracts for deed) is crucial in Ohio real estate practice as they represent an alternative financing method when traditional mortgages aren't available or desirable. This question tests your knowledge of property rights and financing mechanisms. The core concept involves distinguishing between legal and equitable title in seller-financed transactions. Option B correctly identifies that in a land contract, the buyer receives equitable title (the right to use and enjoy the property) while the seller retains legal title (the actual ownership) until full payment. This differs significantly from a mortgage where title transfers immediately to the buyer with the lender holding a lien. The question is challenging because it requires understanding nuanced property concepts and recognizing that land contracts aren't prohibited (A), not equivalent to mortgages (C), and aren't limited to commercial properties (D). This knowledge connects to broader real estate principles including property rights, financing options, and risk allocation in transactions.
Knowledge Background
Essential context and foundational knowledge
Land contracts, also known as contracts for deed, originated as a financing alternative when traditional lending was difficult to obtain. In Ohio, these contracts are legally recognized under Ohio Revised Code Chapter 1333. The structure protects sellers by keeping legal title as security while allowing buyers immediate possession and equity buildup. This arrangement became popular during periods of tight credit or when buyers had blemished credit histories. The concept balances the interests of both parties: buyers gain equity and use rights while sellers maintain ownership security until payment completion.
Think of a land contract like buying a car with payments - you get to drive and use it (equitable title) but the bank keeps the actual title (legal title) until you've made all the payments.
When encountering questions about land contracts, visualize this car payment analogy to remember who holds which type of title.
For questions about land contracts, focus on the title distinction: legal title stays with seller until paid, while buyer gets equitable title and possession immediately.
Real World Application
How this concept applies in actual real estate practice
Imagine working with a buyer who cannot qualify for a traditional mortgage due to recent credit issues. The seller is willing to offer financing through a land contract. As the agent, you would explain to the buyer that they can immediately occupy the home and build equity, but the seller will remain on the deed until the purchase price is paid in full. You would need to ensure both parties understand the default provisions in case of missed payments, as outlined in Ohio's land contract statute.
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