A land contract—also known as a contract for deed, an installment land contract, or a land sales contract—is an agreement between a buyer and seller for the sale and purchase of a specific piece of land. Land contracts may consist of undeveloped land or include both land and building structures located on the land.

Land contracts are often completed with seller financing in which the buyer pays the seller in monthly payments or installments that include an agreed interest rate and a lump sum balloon payment after a certain number of years. When the buyer has made the monthly payments for the required number of years, plus any balloon payment, the seller is required to transfer the title (evidence of ownership) to the buyer, as provided by the land contract.

Land contracts may also be financed by banks or other lenders—often with traditional deed of trust or mortgage agreements. Bank and other lender loans for undeveloped land will often be financed at a higher interest rate and for a shorter term (with a balloon payment) than a traditional home mortgage, for example.

When the balloon payment to the bank or lender comes due a builder or developer may get a takeout loan to replace the existing loan—with the expectation of securing better terms (interest rate, etc.) because the land will be developed (at least in part) and the loan will be better secured by the value of the development (building structures, etc.) on the land.

In Alabama, a land contract, also known as a contract for deed, is a form of seller financing for the purchase of real estate. Under this arrangement, the buyer agrees to pay the seller in installments, often including interest and possibly a balloon payment after a certain period. The seller retains legal title to the property until the buyer completes all payments according to the contract terms, at which point the seller is obligated to transfer the title to the buyer. If the land contract is financed by a bank or another lender, the terms may differ, such as higher interest rates and shorter terms compared to traditional mortgages. For undeveloped land, loans are typically more expensive and may require a balloon payment. Developers may use a takeout loan to refinance the original loan upon development of the land, potentially obtaining better loan terms due to the increased value of the developed property. It's important to note that the specific terms and protections for both parties in a land contract can vary and should be clearly outlined in the agreement. Additionally, Alabama state statutes and federal laws will apply to these transactions, and it is advisable to consult with an attorney to ensure compliance and to understand the implications of such an agreement.