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Contract for Deed

Use a Contract for Deed to protect you and the Buyer!

Legal Scales A Contract for Deed is often used as an alternative means of financing the purchase price of property. The buyer does not receive an actual deed until payments are made under the terms of the Contract for Deed agreement. Download on-line. Free Law Summaries.

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Contract for Deed Information

Contracts for Deed are used as a form of owner financing of real estate. An owner and a buyer enter into a contract in which the owner agrees to give the buyer a deed after the buyer pays the owner a certain amount of money. Usually the contract requires the buyer to make payments over time with interest payable on the unpaid balance. After the buyer pays all of the payments called for under the contract, the owner gives the buyer a deed to the property. During the term of the contract for deed, the buyer is entitled to possession of the real estate and may be required to keep the property insured and pay the real estate taxes, or reimburse the Seller for same.

Advantages:

Closing costs are usually low.
Other financing may not be available for Buyer.
Seller may gain interest income.
Interest terms may be more favorable than conventional rates.
Younger Buyers may not find other sources of financing.

Disadvantages:

Process of foreclosure (or cancellation of a contract for deed) may be shorter than foreclosure of mortgage. This may be an advantage to the Seller.
Property may be depreciated in value after cancellation and repossession by Seller.
If there is a mortgage on the property, the contract may violate a due-on-sale clause in the mortgage which the lender may or may not seek to enforce.
Buyer may lose investment payments that are made and then the Buyer loses the home. Of course, this may also apply in a mortgage situation.

Must a contract for deed be in writing? Yes. All states require that a contract concerning real estate, like a contract for deed, must be in writing.

What is the difference between a contract for deed, land contract and an agreement for deed? These are just different ways of describing the same thing. In some states the term "land contract" is more common than the term "contract for deed" and in other States they may be called an "agreement for deed". You may also see the term "land installment contract".

Does the contract have to be recorded? This depends on your State. In all States a contract for deed may be recorded to evidence the agreement. However, sometimes the parties do not want the terms of their agreement disclosed and therefore do not record the contract.

When will the buyer receive a deed to the property? Generally, when the money due under the terms of the contract are paid.

Learn more about Contract for Deed by using our Contract for Deed Questionnaire

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