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Wisconsin Land Contract (Contract for Deed)

If you are selling property in Wisconsin to a buyer who can't qualify for a mortgage, you can carry all or part of the purchase price under this Land Contract.

What is a land contract / contract for deed?

A Wisconsin land contract (contract for deed, purchase money mortgage, installment sale contract) is a seller-financed arrangement where the property owner acts as the lender for all or part of the purchase price, instead of using a traditional mortgage.

This type of real estate transaction allows the buyer to pay the purchase price over time, with the seller carrying the balance until the last payment is made. In effect, the seller becomes the mortgage lender for the balance of the purchase money.

How does a Wisconsin land contract actually work?

The buyer is granted the right to occupy and use the property as soon as the contract for deed is signed. The seller retains legal title to the property, as security to ensure that the purchase price is paid in full, according to the terms of the contract.

The term "contract for deed" describes the arrangement — when the terms of contract are fulfilled (i.e. the debt, including interest, is paid in full), the seller will release the title deed and transfer ownership of the property to the buyer.

How will payments be made under the terms of the Wisconsin Contract for Deed form?

At the seller's option, the balance can be repaid either by:

regular monthly payments of principal and interest until the full amount has been paid, or
monthly payments with interest for a fixed number of payments with a balloon payment at the end of the term to pay out the balance.

NOTE: If the seller chooses the balloon payment under option 2, the buyer should be required to qualify for a traditional mortgage or refinance before the balloon payment deadline.

Who pays the property taxes and insurance during the term of the contract?

Even though the seller holds the legal deed and retains ownership of the property, the buyer is responsible for property taxes, maintenance, and hazard insurance from the time the Contract for Deed is signed.

What are the specific legal requirements for the State of Wisconsin?

Under Wisconsin law, land contracts:

must be in writing
must clearly state:
- the purchase price
- the interest rate
- the payment schedule
- the duration of the contract (i.e. when the last payment must be made).

What happens if the buyer misses a payment?

Wisconsin laws provide that if the buyer defaults in making payment, the seller can apply to the court for a foreclosure with a short "redemption period". The seller does not need to wait until four payments are missed (as is required in a mortgage foreclosure).

Also unlike mortgage foreclosures,. the "redemption period" requiring the buyer to pay the full outstanding balance could be as short as seven days, in some cases. If they fail to do so, the seller can take back the property and the buyer will lose all its equity in the property.

The seller must notify the buyer that they are in default and give them a deadline to pay before they start a foreclosure, in accordance with the notice requirements set out in the land contract.

Tips to Avoid Potential Land Contract Issues

1. Ensure the property is described properly.

If the property description is incomplete, inaccurate, or unclear, the land contract may not be enforceable under Wisconsin law.

To avoid confusion: Always use the legal description exactly as it is set out on the title deed or your property tax records.

2. Make sure the payment terms and interest rate are clearly stated.

Ensure that the contract contains clear and mutually agreed terms for:

the interest rate, and how it is to be calculated
payment schedule and payment amounts
grace periods, if any, and penalty terms for late payments.

3. Set out who is responsible for maintenance and repairs on the property.

The contract should be very clear on who is responsible for repairs (both minor and major), property taxes, and property insurance.

4. Make sure you transfer ownership to the buyer once the final payment is made.

Under the terms of the Land Contract / Contract for Deed, the seller must transfer legal title to the buyer once the final payment has been made.

To avoid problems: Include a provision in the contract stating that the seller must deliver the deed within a specific time frame after final payment, such as within 10 days.

5. Buyers should record the contract to protect their interest.

Wisconsin law does not require land contracts to be recorded, but failing to record the contract means that the buyer’s interest is not a matter of public record, and is not protected against any action of the seller, or anyone acting on behalf of the seller.