A land contract in Michigan lets you sell your land and carry the financing yourself: the buyer pays you in installments, takes possession, and gets the deed only after the last payment. Michigan law lets you take the land back by forfeiture if the buyer stops paying, but only if the contract says so, and only on the state's clock. Here is the seller's side of the rules, with the statute next to each one.
This is general information, not legal advice. A real estate attorney in your state can confirm how it applies to you.
For the basics of seller financing, read how a land contract works in general.
What is a land contract under Michigan law?
Michigan statutes call the seller the vendor and the buyer the vendee. You keep legal title until the contract is paid. The buyer holds what Michigan Legal Help describes as equitable title, the right to obtain full ownership once the price is paid in full.
The contract has to be signed by you as vendor and acknowledged before a notary or a judge (Mich. Comp. Laws § 565.351). It does not fail just because nobody notarized or recorded it (§ 565.361(6)). Because Michigan lets you pick forfeiture or foreclosure after a default, the exact words in the contract matter more here than in most states. Have a Michigan attorney draft it.
Do you have to record a land contract in Michigan?
Recording is not required, but you should, and most sellers record a short memorandum rather than the full contract so the price and terms stay private. A signed and acknowledged land contract is entitled to be recorded with the register of deeds in the county where the land sits, and once recorded it has the same force against later buyers and lienholders as a recorded deed or mortgage (§ 565.354).
The register will not record a land contract without a certificate from the county treasurer that all property taxes have been paid for the preceding five years (§ 211.135(1)), so clear any delinquent taxes first. The recording fee is a flat $30 per document regardless of page count (§ 600.2567).
Who pays property taxes and insurance on a land contract in Michigan?
The buyer, in almost every contract. Michigan Legal Help's land contract overview puts it plainly: the buyer is in charge of repairs and property taxes in most land contracts, and most contracts require the buyer to carry insurance. Write it into the contract, and keep the right to pay the taxes yourself and add them to the balance if the buyer falls behind. A tax lien on land you still hold title to is your problem.
Here is the part that catches sellers. A conveyance by land contract is a transfer of ownership for property tax purposes, so the taxable value uncaps for the calendar year after the year the contract is signed (§ 211.27a(6)(b)) and the tax bill jumps toward the assessed value. The buyer has to file a Property Transfer Affidavit with the local assessor within 45 days of the contract (§ 211.27a(10)). Miss it and the penalty is $5 a day up to $200 plus the back taxes, interest and penalty (§ 211.27b). Build the uncapped number into the payment talk up front, or the first tax bill becomes the first missed payment.
What happens if the buyer stops paying?
Two routes. Forfeiture is faster. Foreclosure can recover more.
Forfeiture by summary proceeding. You can use the district court's fast eviction-style process only if the contract expressly provides for forfeiture, and only for money actually due or another material breach; accelerating the whole balance does not count (§ 600.5726). The process starts with a written notice of forfeiture that gives the buyer at least 15 days to pay what is owed and cure any other breach, longer if the contract says so, and it must list the parties, the legal description, the unpaid amounts and their due dates (§ 600.5728).
If the buyer does not cure, you file in district court. Even after a judgment for possession, the court cannot issue the writ that puts you back on the land until 90 days have passed if the buyer has paid less than 50% of the purchase price, or 6 months if 50% or more (§ 600.5744). The buyer can pay the judgment during that window and keep the contract.
The trade-off: a judgment for possession after forfeiture bars any claim for the money that was due under the contract at the time of trial (§ 600.5750). You get the land and the payments already made, not the arrears.
Judicial foreclosure. The circuit court has jurisdiction to foreclose a land contract the way it forecloses a mortgage (§ 600.3101). The land is sold and the buyer gets 6 months after the sale to redeem by paying the bid plus interest at the contract rate (§ 600.3140(2)). It is slower and costs more in attorney fees, but it is the route if you want a shot at the balance rather than just the parcel. Decide with a Michigan attorney before the first notice goes out, because a defective notice restarts the clock.
Is transfer tax due on a land contract in Michigan?
Not when you sign it. Michigan's state transfer tax covers contracts for the sale of property and deeds (§ 207.523), but it specifically exempts a land contract in which legal title does not pass to the buyer until the total consideration has been paid (§ 207.526(o)). The county transfer tax has the matching exemption (§ 207.505(m)).
The tax comes due on the deed you deliver at payoff, and the seller pays it within 15 days of delivering the instrument (§ 207.523). The rates are $3.75 per $500 of value for the state (§ 207.525) and 55 cents per $500 for the county, up to 75 cents in a county of two million or more people (§ 207.504). On a $60,000 parcel that is $450 state plus $66 county. Spell out in the contract who covers it, because by default it is you.
What interest rate can you charge on a land contract in Michigan?
For a private seller, up to 11% per year. Michigan's usury statute lets a land contract vendor who is not a licensed lender charge interest not exceeding 11% per annum, and that figure includes everything the federal Truth in Lending Act counts as a finance charge, so points and fees eat into the cap (§ 438.31c(6)).
One federal note. The Dodd-Frank loan originator rules in Regulation Z apply to closed-end consumer credit secured by a dwelling (12 CFR 1026.36(b)), so bare vacant land generally sits outside them. If the parcel has a house or mobile home on it, the seller-financer exclusions are narrow: three or fewer properties in 12 months with a fully amortizing, fixed-rate (or five-year-plus adjustable) loan and an ability-to-repay check, or one property in 12 months for an individual, estate or trust with no negative amortization (12 CFR 1026.36(a)(4) and (a)(5)).
Running the numbers before you sign
Price, down payment, rate, term and balloon decide whether a land contract is worth the lender's risk you are taking on. Run your own figures through our land contract calculator to see the monthly payment, how little principal comes in during the first few years, and the balloon balance if you cap the term. Set the payment with the uncapped tax bill in mind.
Selling an existing land contract, or just selling for cash
If you already hold a Michigan land contract and want out, you can sell the vendor's interest to a note buyer at a discount, or wait for payoff and deed the land then. Either way the buyer's recorded interest stays with the land, and any deed you give in the meantime is subject to it, as covered in our Michigan quitclaim deed guide.
If you have not signed anything yet and being a lender for ten years does not appeal, the other route is to sell the land for cash and close in 7 to 21 days, with no notices to serve and no six-month wait if someone stops paying. Our page on how to sell land in Michigan covers that path.
Minnesota handles a missed payment with a statutory notice instead of a court judgment first; compare the Minnesota contract for deed rules.
FAQ
Does a land contract have to be notarized in Michigan?
Yes to be recorded. The vendor's signature must be acknowledged before a notary or judge (§ 565.351) for the contract to be entitled to recording (§ 565.354). An unnotarized contract still binds the parties (§ 565.361(6)); it just cannot go on the public record.
How long does land contract forfeiture take in Michigan?
At minimum, 15 days of notice (§ 600.5728), then the district court case, then a 90-day wait after judgment if the buyer has paid under half the price or 6 months if half or more (§ 600.5744).
Who pays the transfer tax on a land contract in Michigan?
The seller, and only when the deed is delivered at payoff (§ 207.523). The contract itself is exempt from state and county transfer tax while it holds legal title until the price is paid (§ 207.526(o), § 207.505(m)).
Does a land contract uncap property taxes in Michigan?
Yes. A conveyance by land contract is a transfer of ownership, and the taxable value resets the calendar year after the contract is entered into (§ 211.27a(6)(b)). The buyer files the Property Transfer Affidavit within 45 days (§ 211.27a(10)).