This is the risk buyers almost never price, and it is entirely foreseeable.
One: the seller has a mortgage on the land
If the seller still owes a bank on the parcel they are selling you, their lender has a recorded lien that predates your interest. Pay the seller faithfully for six years while the seller stops paying their bank, and the bank forecloses on a parcel you have nearly paid off. Your claim is against the seller, who is by then the kind of person who stops paying their mortgage.
What to ask: "Is there any existing mortgage, deed of trust or lien on this parcel?" Then verify it yourself at the county rather than taking the answer on faith. If a lien exists, ask how it is being released — a partial release at closing, or payoff from your purchase funds handled by a title company.
Many seller-financing contracts also contain a due-on-sale clause risk running the other way: the seller's own mortgage may give their bank the right to call the loan if the property is sold. Ask whether the seller's lender has consented.
Two: the seller dies
If the seller holds title under a contract for deed and dies, the parcel is an asset of their estate. You are now dealing with an executor, possibly heirs who disagree, and probate timelines measured in months or years. Your right to the deed may be perfectly valid and still take a long time and a lawyer to enforce.
If you already hold the deed, this is a non-event. The seller's estate inherits a note receivable. You keep making payments to whoever inherits it, and your ownership is unaffected.
That asymmetry is, on its own, a strong argument for the deed-at-closing structure.
Three: the seller sells your note
Promissory notes are assets, and they are bought and sold routinely. The seller who was patient with you in month four may assign your note to an investor who is not, and you may find out through a letter telling you where to send payments.
This is legal and often harmless, but the terms travel with the note. Whatever your contract permits, the new holder may enforce. If your contract allows forfeiture over one missed payment, assume one day it will be held by someone willing to use that clause.
What to ask: "Can this note be sold or assigned, and will I be notified?" Then read the default terms as though a stranger will be enforcing them, because one might.
Four: the seller simply stops responding
The most common failure in this industry is not dramatic. It is a seller who becomes unreachable once payments are coming in — who will not provide a payoff figure, will not answer questions about the balance, and will not deal with a problem on the parcel. Buyers report this pattern regularly. One land due-diligence service lists "no contact method after payments begin" among its red flags.
What to ask: "Who services this loan, and how do I get a payoff statement?" A seller using a third-party servicer has built a system that survives their own absence. A seller taking payments by app with no statements has built one that does not.
What to put in place before you sign
- Close through a title company or attorney. Escrowed funds, a title search and a recorded deed. The cost is small and it removes most of the above.
- Get owner's title insurance where the structure allows it. It is a one-time cost that pays for exactly this category of problem.
- Verify the chain of title yourself at the county before closing.
- Require written payoff statements on request, and an annual statement of principal and interest.
- Ask where payments are held and whether taxes and insurance are escrowed. Unpaid property taxes on a parcel you are buying become your problem fast.
The test
Ask a seller: "What happens to my position if you die next year?"
It is a blunt question and it is a fair one. A seller whose structure is sound will answer it in a sentence, because the answer is that nothing happens — you already own the land and their estate inherits a note. A seller whose structure is not sound will not enjoy the question, and that reaction is the most useful information you will get all day.
General information, not legal advice. Estate, lien and foreclosure law varies considerably by state.