If you are engaging in any of these real estate transactions in Indiana, you should read this article-

● Selling residential property on land contract.
● Extending credit to any home purchaser.

In 2008, Congress passed and President Ge

orge Bush signed into law the Housing and Economic Recovery Act, (Public Law 110-289) (HERA). HERA is designed to assist with the recovery and the revitalization of America’s residential housing market – from modernization of the Federal Housing Administration, to foreclosure prevention, to enhancing consumer protections. The SAFE Act is a key component of HERA.

The SAFE Act
The SAFE Act is designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators. The SAFE Act requires states to have licensing and registration systems by July 31, 2010. Indiana’s SAFE Act law was passed last year and goes into effect in June 2010. An easier-to-read version of the Indiana law appears in the Indiana Administrative Code.

You Need a License, If You Are a “Loan Originator”
You need a loan originator’s license, if you are a loan originator as defined by the new Indiana law enforcing the SAFE Act. In a sentence, anyone who offers or provides a residential mortgage loan or extends credit for a home purchase is deemed a loan originator and is required to get a license.

“Anyone who offers or provides a “residential mortgage loan,” such as a land contract, is a loan originator and is now required to get a license.

You Might Be a “Loan Originator”
The SAFE Act defines “loan originator” as “an individual who (1) takes a residential mortgage loan application; and (2) offers or negotiates terms of a residential mortgage loan for compensation or gain.” This definition is broadly interpreted. If you sell a residential property on credit, such as is the case under a land contract, YOU ARE A LOAN ORIGINATOR under the SAFE Act.

There are exceptions under the SAFE Act. Here are a few:
• Selling a home you previously occupied/lived in as your residence.
• Certain clerical and administrative tasks.
• Selling a home to an immediate relative, as defined by the statute.
• Selling commercial buildings, as defined by the statute.
• An attorney who negotiates terms of a residential mortgage loan with a prospective lender on behalf of a client as an ancillary matter to the attorney’s representation of the client, unless the attorney is compensated by a lender, mortgage broker, or other mortgage loan originator or by an agent of such lender, mortgage broker, or other loan originator.

What Is a “Dwelling”
The SAFE Act’s definition of “residential mortgage loan” includes a loan secured by a consensual security interest on a “dwelling” and cross-references the definition of dwelling in section 103(v) of the Truth in Lending Act (TILA) (15 U.S.C. 1601 note). Regulation Z, which implements TILA, defines dwelling to mean “a residential structure that contains 1 to 4 units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.”


Most small investors who sell residential property on land contract are now required to have a mortgage loan originator’s license. Obtaining a license is not easy, fast or cheap. As a result, most investor will no longer sell on land contract.

As always, feel free to contact this author for specific answers to your real estate investing and legal questions, or call for a consultation. Good luck and Happy Real Estate Investing.


  1. this is BS if you ask me , seems to me if a person buys a home and wants to sell on land contract to someone he should be able to do it ,,the right of an owner to sell a property anyway he wants should not be taken away by the government as long as there is no fraud involved. I deal with a few investors willing to buy for cash and then sell on land contract to local buyers and I feel they are providing a valuable service for these buyers,, they cant get money from a bank right now, they dont want to rent and throw money away,, LC is a good option and I hate to see it taken away by yet another LAW..

    • I studied the constitution, unlike most in Congress. I have read the Federalist Papers, Frederick Hayek and the other great legal thinkers on freedom, limited government and individualism.

      I agree with your thoughts. Please write your Congressmen.

  2. I was wondering if you could tell me about a building a family member perchased on land contract. The building had three apartment in it. It was purchased 11 years ago for 150k. My family memeber paid 90k on the land contract until economy got bad and he gave it back. What happens now legally? My family memeber owns a home and I am purchasing a property from them rent to own. Are we in any danger of being suited for the remaining balance. The property was given back in same condition when it was purchased. The land contract involves two parties a seller and a buyer no third party lender. The contract was written by a lawyer just to make it offical. Since this is a defaulted land contract with equity paid shouldnt the land own simply take back the property and thats it?

  3. So if I am trying to buy a house on land contract who would I use to do the contract, negotiation etc? Do you have any referrals.

  4. What state are you in?

    I would need to see your contract to help you. I am perplexed as to why your seller thinks you cannot sell the home. Is there a pre-payment penalty in your contract?

  5. Nancy-

    My guess is that you are responsible. I would need to see a plat or survey, determine if there is an easement involved and see the physical structures you have described. It is impossible for me to say for sure without more information, but my “wild” guess is that you are likely responsible.

    If you would like to retain me as your counsel to discuss this in detail, please email me at matt@indybizlaw.com or call my office- 317.663.0650. I do not discuss client matter on this blog site to preserve attorney-client privilege and confidentiality.

    Thank you.


  6. Jeanine-

    Great questions. Unfortunately, I cannot give you public advice through this blog site, and I’d need to read the contract.

    Contact me through my law firm, if you’d like my professional assistance. Send me an email at matt@indybizlaw.com.



  7. No, a lawyer is not required. In fact, realtors often draft land contracts. However, I personally think that many non-lawyers practice law by helping others with contracts and other legal documents. I think it is very dangerous and probably plain stupid to use a form from the Internet.

    A good alternative is a state-specific virtual law office- such as http://www.indianavirtuallaw.com/. FULL DISCLOSURE- That site is operated by my wife, who is also an attorney. Stay away from Legal Zoom and other non-lawyer form websites. Very dangerous!

  8. Hi Susan. You probably have some options.

    I cannot provide legal advice online to non-clients.

    However, if you’d like to talk to me privately, please send me an email at Matt@IndyBizLaw.com. Also, I would need to know the name of your seller to run a conflicts of interest check.



  9. Sherry-

    Thanks for your inquiry.

    Please see my other comments regarding the applicability of the SAFE Act to land contracts in Indiana. That is not a simple answer, because of confusing signals coming from the Indiana Attorney General’s Office. I have addressed that issue several times in different articles. Please also listen to my tele-classes at http://www.MyREIAdvisor.com.

    As to your question regarding co-signors, I could not answer that question without seeing the contract.

    As to the filing of a lawsuit, I would have to see the contract to read the notice, opportunity to cure and remedies provisions of that particular contract.

    If you’d like to seek my professional assisatance on these issues, please contact me at my law office- http://www.indybizlaw.com/contact



  10. If you are talking about problems arising from the SAFE Act, you might be fine. However, the answer is a little complex. I would encourage you to listen to the two tele-classes I gave on the SAFE Act at http://www.myREIAdvisor.com. If you’d like me to provide a definitive answer, I’d require more data. You may email me at my law office, if you are interested in retaining my law firm to help you with this.


  11. Crystal-

    I cannot provide legal advice on this website. I can only provide general information.

    If you’d like to retain my law firm to get answers to your specific legal questions, please feel free to contact me through my law firm- http://www.IndyBizLaw.com.



  12. A judge decides whether you are eligible for forfeiture, rather than foreclosure. You might be eligible for the exception under the SAFE Act. I cannot render legal advice on a blog site, so I cannot say for sure. You would have to contact me privately through my law firm for legal advice.


  13. Lynn-

    I cannot provide legal counsel or answer specific legal questions on this blog site. Please contact a lawyer for legal help.

    Generally speaking, a contract can be cancelled by the terms of the contract itself, or in the event the other party has breached the contract. I would have to read any contract to determine how it might be cancelled.

    Thanks and best wishes.


  14. I sold home to my niece on 5 year written, notarized and recorded contact. She is 5 months behind on payments. She also has violated other terms. How do I repo home and get her out. Terms of contact say I have right to do that now. Am I correct?

    • Robert-

      Great questions. I cannot provide legal advice on an open blog platform that is seen by the public. If you’d like to consult with an attorney, please call my legal assistant, Lisa, at 317-663-0650. We’d be happy to schedule a phone consultation.


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