Recorded mortgage or a land contract: which one is the better thing to hold?

We've cleaned out two houses in the last year that came back to sellers on land contracts, and both took longer than the seller expected. In one, the buyer had been in for four years and had real money in, and the whole thing turned into a negotiation rather than a quick forfeiture. Whatever the statute says, the practical timeline was months.

Question from the trades side. If the buyer on a land contract reroofs the house and then defaults, who owns the roof? Do they get paid for it or does that just become the seller's improvement?

@solder the general answer is that improvements go with the real estate, so if the contract terminates the improvement stays. What the buyer can recover for it depends on state law and on the contract itself, and the licensing material I'm working through says almost nothing useful about it, which tells you it's a lawyer conversation.

Disclosure requirements around installment sales also differ by state, so don't assume the same paperwork works two states over.

I sold a beat up two bedroom on a land contract once and the buyer gutted the only bathroom in month five, then ran out of money and stopped paying. So I got the house back with no bathroom, which is worse than the house I sold! Scope creep, except it wasn't even my scope.

If I did it again I'd want a clause about alterations over some dollar amount needing written consent, and I'd want to know what my remedy actually costs before I signed anything.

In the rural markets I look at the price points make this decision for people. On a $38,000 house with $3,000 down, a judicial foreclosure can cost a meaningful fraction of the whole balance, and sellers use land contracts because the math on the standard route doesn't work. Whether that's the better instrument or just the affordable one is a different argument.

Which of the two is actually easier to sell to a note buyer later? That's the part that would decide it for me, since I don't know yet whether I'd want to hold.

@kestrel from everything I've read while learning this side, buyers want a promissory note secured by a recorded first mortgage or deed of trust, with a title policy and a clean legal description. Land contracts do trade, and they trade at wider discounts, and some buyers won't touch them at all in states where the remedy is slow or unsettled.

So if liquidity matters to you, the first shape narrows the discount. If you're never selling, @hollow's cost argument is the one that bites.

What strikes me reading this is that the choice is mostly about what happens when things go wrong, and everyone underwrites the good case. @harrow lost a bathroom, @cobalt spent months on two files, and none of that shows up in the yield you calculate at closing.