Land contract terms

Using a lawyer to complete a land contract for a farm I am going to buy from a family member. Purchasing the land on contract not only is advantageous to me but also the seller in this case. I want to make one payment a year. I do have the opportunity to determine the month which the payment will be made. I am sort of going back and forth whether the spring or fall would be better. Is there sort of a standard for land contracts?? I typically store grain for spring and summer sales. Just looking for your thoughts on this. Thanks

Anything you want that is legal and both parties agree. Lawyer for sure. Bought 4 properties years ago with no interest. First lawyer said he couldn't do it. Found another, okay. Dave

when do you expect any farm income? Payment right after that. This is sort of like an old-fashion Demand Note, where you could pay any amount at any time as long as the yearly amount was paid within the specified one year payment period, for the 10 years of the contract.

Was the first lawyer unwilling to write a no-interest contract because of the imputed interest rule? The IRS will "impute" (assume) interest, even if the parties agree to no interest, and tax the seller accordingly. The imputed rate varies- its around 4% now, I think.

I don"t refuse to write no-interest contracts, but make the seller sign an acknowledgement that I told him of the rule and he elected to go forward anyhow.

Andy, I have bought and sold farms using a Land Contract and prepared several since I became an Attorney and in answer to your question

"Is there sort of a standard for land contracts??"

Id say NO as far as the frequency of payments and rate of interest (subject to Mikes good information and any statutory interest limits and/or disclosure), I have used/drafted monthly payments and also yearly as you mentioned or semi annual. MOST EVERYTHING IS NEGOTIABLE

The agreement of the parties (provided no ambiguity) is all fine and legal as far as the Courts are concerned subject to some common law or statutory restrictions and the Statute of Frauds, Capacity, Legality, Writing, Max Interest, Disclosure, etc. etc. blah blah blah

Whats important is BOTH parties understand and agree to the written terms and theres no holes or misunderstandings and that the agreement is all contained within the "four corners" of the document, as a typical contract may contain language such as "this represents the entire agreement among the parties" which means something like additional verbal or side agreements arent recognized, and theres the similar Parol Evidence Exclusion Rule etc. The courts take the attitude if you wanted certain terms they better be in the writing or you cant come crying to us later lol

PS While both are legal, I take a slightly different approach if I'm drafting a contract for the Buyer or Seller. If for the Seller, I dont want to deliver or escrow any deeds or even have the document Recorded (once its paid Buyer gets a deed). If for the Buyer, Id prefer a Purchase Money Mortgage where the Buyer gets the Deed up front and the Seller takes back a Mortgage securing the debt or at least escrow the deed with everything recorded.

CONSULT A PROFESSIONAL, A LOCAL ATTORNEY FAMILIAR WITH REAL ESTATE AND CONTRACT LAW IN SUCH CRITICAL AND IMPORTANT MATTERS versus opinins offered on a Tractor Forum is my best final free professional advice.

God Bless Yall n Happy New Year

John T BSEE, JD The Country Lawyer

This has nothing to do with contract terms, but I would suggest setting yourself up a payment schedule based on putting money into savings the times of the year when you typically have money, so that it is a single payment for them but not for you. Excavation contractors in northern states typically get loans for equipment that do not call for payments in Jan, Feb, March. This can help you stay on track for having the $ when prices drop.

What Mike said. You must have either did your own taxes or not give your tax preparer the full details. An IRS audit would result in additional tax and penalties. Maybe a difference in capital gain rate versus ordinary income rate. Hopefully your case wouldn't rise to an evasion or false return finding. Good Luck.

Not applicable here but I've done a number of rent to own contracts for housing. Good for the seller if they don't make the payments.

Despite farm land generally being up nicely these days (unless you're buying) we're in what could be called uncertain economic conditions.
While it may not be necessary with a family purchase, try to make it a "stand-alone" deal: one that succeeds or fails without pulling in/down your existing assets...I don't know if that's possible in your state, but it'd be nice if the new place fails to pay for itself, craters in value, you become debilitated, or for any reason the new place has to be given up/given back....Good luck.

Mike, you are exactly right. I should have included that information. Seller said he did not care about the imputed interest. Dave