CLEVELAND, Ohio — Ohio’s real estate market has changed a lot of the last few years, and now a study found that Ohio is a hotspot for land contracts.
A study done by the Pew Charitable Trusts, a nonpartisan organization that releases reports by collecting data, has found that Ohio is second in the nation for the amount of land contracts buyers have entered into over a less than 20-year period.
Between 2005-2022, counties throughout Ohio have recorded over 60,500 land contracts, showing it’s commonplace throughout the state, Pew said.
Land contracts are legal contracts where a buyer can enter into financing directly with a seller until the purchase price of a property is paid in full, which Pew noted, means full ownership of the property is not transferred to the buyer at the time the contract is initiated.
The terms can be more flexible than traditional mortgage loans through a bank or other mortgage lender, and are typically used in cases where a buyer is either unwilling or unable to get a traditional mortgage.
Throughout that 2005-2022 period, Franklin County led the state reporting 3,076 land contracts, Pew said. This was followed by Montgomery County at 2,967, Trumbull County at 2,922 and Stark County at 2.889.
Cuyahoga County reported 2,752 land contracts, which is lower than Summit and Lucas Counties, that had 2,854 and 2,583, respectively.
Pew said that of the over 60,500 land contracts made throughout the state, 80% of them were used to purchase residential properties, a lot of which are low-cost properties that are hard to get traditional mortgage loans for. The other 20% was for agricultural and commercial properties.
Data also found that most of these contracts were between individual buyers and sellers, while less than 20% were between a corporate entity and an individual buyer, Pew said.
There are protections for buyers and sellers that decide to go this route. Some of the laws Pew highlighted were:
- A seller is required to record contracts by submitting them to the county record’s office within 20 days of execution of the contract
- A seller must disclose to buyers any fees separate from the contract price
- Buyers are entitled to receive annual disclosures upon request, which details how the buyer’s monthly payments have reduced the outstanding principal balance
- Buyers have a 30-day window to catch up on missed payments
Pew said that even with these protections, some Ohio buyers reported experiences like dilapidated properties, unpaid property taxes and high interest rates.
