Land Contract Forfeiture: When Your Buyer Stops Paying

Educational only. This explains how these situations generally work. It is not legal, tax or financial advice, and the rules differ by state — talk to an attorney or CPA about your own situation before you act on any of it.

Land contract forfeiture: the short answer

Land contract forfeiture is how a vendor reclaims a house after the buyer stops paying, instead of foreclosing a mortgage. Michigan allows it quickly regardless of the buyer's equity. Ohio and Indiana require a slower judicial foreclosure once the buyer has paid enough into the deal, protecting the equity a fast forfeiture would otherwise erase.

This is educational information, not legal advice. Land contract terms vary, and the choice between forfeiture and foreclosure has real consequences. Talk to a real estate attorney licensed in your state before filing or responding to either.

What forfeiture actually is, and how it differs from foreclosing a mortgage

In a land contract, the vendor never transfers the deed at closing the way a mortgage lender does. The vendor keeps legal title and the buyer gets equitable title — the right to possess and eventually own the house once the contract is paid off, alongside the vendor's own ongoing legal ownership. That structure is what makes land contract forfeiture possible at all: because the vendor still legally owns the property, a default can in theory just end the contract and return possession, without the sale, auction and redemption machinery a mortgage foreclosure requires.

In theory is doing real work in that sentence. Courts in most of the country have grown uncomfortable with a remedy that can erase years of a buyer's payments overnight, and the three states this site buys houses in — Michigan, Ohio and Indiana — have each drawn the line between "fast forfeiture" and "slow foreclosure" in a different place.

Three states, three different clocks

The pattern behind land contract forfeiture across all three states: the more a buyer has paid, the less willing the law is to let a vendor simply keep it all and take the house back for free. Michigan is the outlier — it protects equity through longer redemption periods rather than blocking forfeiture outright.

Michigan: forfeiture is available regardless of equity, but redemption periods scale with it

Under MCL 600.5726, a Michigan vendor can forfeit a defaulted land contract as long as the contract itself gives that right, after serving a notice of forfeiture with a 15-day cure period. If the buyer does not cure, the vendor files a summary proceeding for possession in district court — weeks, not the many months a circuit-court mortgage foreclosure takes.

One real limit: a forfeiture judgment recovers possession, not money. The statute specifically excludes "accelerated indebtedness by reason of breach," meaning a vendor cannot also get a judgment for the full remaining contract balance the way a foreclosure allows. You get the house back; you do not additionally get to sue for what was still owed on it.

Equity still matters to the timeline. Under MCL 600.5744(4), the buyer gets 90 days to redeem after judgment if they paid less than 50% of the price, or 6 months if they paid 50% or more. A vendor two years into collecting payments from a buyer who built real equity is not getting the house back next month, even in Michigan — the redemption window alone can run half a year.

Ohio: the 20%-or-5-years line is a hard stop

Ohio starts the same way Michigan does: under ORC 5313.05, forfeiture can only be enforced after 30 days from default, and the buyer can cure at any point in that window by paying what is currently due.

Past that point, Ohio splits. If the buyer has paid under 5 years and under 20% of the purchase price, the vendor can still repossess through the land-contract forfeiture process. But under ORC 5313.07, once either threshold is crossed — 5 years of payments or 20% of the price, whichever comes first — forfeiture is off the table entirely. The vendor's only remaining route is "a proceeding for foreclosure and judicial sale," the same court process used to foreclose a mortgage: filing suit, a judgment, a sheriff's sale, and the buyer's equity (if any, after the vendor is paid what is owed) returned as sale proceeds rather than simply forfeited.

A vendor who assumes the fast process still applies because "it's my land contract, I hold title" is the person most often surprised in Ohio. Once either threshold is crossed, the contract's own forfeiture clause stops being enforceable no matter what it says.

Indiana: no statute, a case-by-case equity test instead

Indiana has never codified a land-contract-specific statute the way Ohio and Michigan have. Instead, the controlling law is the Indiana Supreme Court's 1973 decision Skendzel v. Marshall, which held that forfeiture is "offensive to our concepts of justice and inimical to the principles of equity" once a buyer has built real equity, and ordered judicial foreclosure instead — treating the vendor's retained title as functionally a mortgage lien rather than true ownership.

The court left forfeiture available for "an abandoning, absconding vendee" or genuinely minimal payment, and later cases put numbers on where that line sits. In Morris v. Weigle, the Indiana Supreme Court treated 29.7% of the purchase price as substantial equity, and follow-on cases have applied the same reasoning to figures in the 30–40% range. There is no bright-line percentage in a statute — an Indiana court decides case by case whether what was paid in is "minimal" or "substantial," which means a vendor cannot know for certain which process applies without a lawyer reviewing the actual payment history.

What you actually get back, and the risk vendors forget

Assume the process finishes and the property is legally yours again. Two things are worth planning for before you think about selling it.

Condition, almost always. A vendee who stopped paying was usually also stretched on maintenance, insurance and utilities before the default. Deferred repairs — a roof past due, a furnace that was never serviced, months of an unheated house in a cold-climate market — are the norm, not the exception, in a reclaimed land-contract property.

Other liens do not disappear. Forfeiture or foreclosure clears the vendee's interest in the contract; it does not erase a code-enforcement lien the city recorded while the vendee was in possession, a contractor's lien from unpaid repair work, or delinquent property taxes that accrued during that time. Those liens ride with the property and come off the top of any future sale — the general mechanics are the same as any other lien, covered fully in selling a house with a lien on it.

The wrap risk. If you, the vendor, still owe your own mortgage on the property — a common setup called a wraparound land contract, where the buyer's payments were meant to cover your own loan payment plus a spread — that obligation does not pause while the buyer is in default. A vendor collecting $1,400 a month from a vendee while paying $950 a month to their own lender nets $450; the day the vendee stops, the $950 does not. Vendors who fall behind on their own mortgage while pursuing a slow Ohio or Indiana foreclosure against a defaulting buyer can end up facing their own lender's foreclosure at the same time.

The honest tradeoff: selling a reclaimed house

A house worth $150,000 repaired, needing roughly $20,000 of work after a vendee's deferred maintenance.

The cash figure follows the same four-term formula published in how cash home buyers calculate offers: $150,000 after-repair value, minus $20,000 of repairs, minus $16,500 of resale and holding costs, minus $14,000 of margin.

A worked illustration on one hypothetical property. Not a quote, not a prediction about your house, and not a fixed formula we apply.

Listing wins by $13,250 in this example, before subtracting any lien that survived forfeiture or your own remaining mortgage — both come off either number identically, same as on any other sale. Where a cash sale earns its lower price here is specific: no repair budget to fund up front on a house you did not plan to own again, and no months of carrying a second property while your own mortgage, insurance and taxes keep running.

Alternatives worth considering before forfeiture reaches a courtroom

A handful of options can resolve a default without land contract forfeiture ever reaching a courtroom.

• A negotiated deed in lieu, or voluntary surrender. A buyer who knows they cannot catch up may hand back possession and sign a deed voluntarily, skipping the notice period, the cure window and the court filing entirely — faster for both sides than a contested proceeding.
• A short repayment plan. If the default is recent and the shortfall is a month or two, catching up may cost the vendor far less than months of vacancy, legal fees and deferred maintenance.
• Selling the contract itself. Rather than taking the property back, a performing or even a defaulted land contract receivable can sometimes be sold or assigned to a note buyer — a different transaction from selling the real estate, and one this site does not offer.
• Mediation before filing. Especially in Indiana, where the outcome genuinely turns on how much the buyer has paid, a lawyer-reviewed conversation before filing can avoid guessing wrong about which process applies.
• Listing with an agent once you have title. Our own worked example above shows listing outperforming a cash sale by $13,250 on a property that needs real repair work — take that route if you can fund the repairs and carry the holding time.

Common questions

What is land contract forfeiture?

Land contract forfeiture is the process a vendor (seller-financer) uses to reclaim a house after the buyer stops paying, ending the buyer's equitable interest and returning possession to the vendor without the sale-and-redemption process a mortgage foreclosure requires. It is only available where the contract itself allows it and, in most states, only below certain payment or time thresholds.

Can a land contract vendor always take the house back if the buyer stops paying?

No. Michigan allows forfeiture in most cases regardless of the buyer's equity. Ohio requires judicial foreclosure instead once the buyer has paid 20% of the price or made payments for 5 years, whichever comes first. Indiana has no statute at all — courts decide case by case, and "substantial" equity (courts have found 29.7% substantial) generally requires foreclosure rather than forfeiture.

How long does it take to get a land contract property back?

In Michigan, a district-court forfeiture proceeding can move in weeks, though the buyer then gets a 90-day or 6-month redemption period depending on how much of the price they paid. In Ohio and Indiana, once a judicial foreclosure is required, expect a timeline closer to a mortgage foreclosure — typically many months, including a sheriff's sale.

Does the vendor get to keep the buyer's payments after forfeiture?

In Michigan, generally yes on a straightforward forfeiture — the vendor recovers possession but cannot also sue for the unpaid balance. In Ohio and Indiana, once the case crosses into judicial foreclosure, the process instead orders a sale and an equitable accounting, which can mean returning some of the buyer's equity rather than the vendor keeping everything paid in.

What happens to liens the buyer placed on the property?

They generally survive. Forfeiture or foreclosure clears the buyer's contract interest, not liens recorded against the property during their possession — a code-enforcement lien, a contractor's lien, or delinquent property taxes still attach and come off the top of a future sale, the same as any other lien.

Can I sell the house while a forfeiture or foreclosure case is still open?

Not with clear, insurable title. A buyer needs the case fully resolved and the deed or judgment recorded before a sale can close — including a cash sale, since a buyer purchasing real property needs marketable title, not a property still tied up in litigation.