How a Contract for Deed Works
If you own a home or other real estate that has been on the market a long time, or are looking for how to purchase a house but unable to get mortgage financing, a contract for deed may be what you need. In essence, a rent to own contract is created in which the tenant/buyer agrees to pay an installment payment in the form of rent, as specified in the contract for lease agreement. On the date for final payment in the rent to own agreement, the specified total purchase price will have been paid. When the agreement has been fulfilled, then the owner/landlord transfers a quit claim deed or warranty deed to the buyer/tenant.
If the buyer fails to complete the terms of the agreement, there may be forfeiture of the payments made. However, the buyer and seller may include terms in a contract for lease agreement for handling late payments to avoid forfeiture of the buyer's equity. The local real estate recorder's office should be contacted for information and policies for filing purchase contracts for rent to own homes.
When the buyer's payment is past due on a land installment sales contract, the seller has the right to enforce the lease agreement. It will be a matter of determination for the court based on the facts in each purchase agreement. The court may either:
- Strictly uphold the terms of the agreement, making the buyer vacate the property, allowing forfeiture of the buyer/tenant's equity in the property.
- Declare the buyer in default, but give the buyer a deadline to cure the default and pay off the balance owed or vacate.
- Declare forfeiture unfair and make the seller return part or all of the installment payments made under the purchase contract for the house.
- Interpret the agreement as really being a mortgage, and force the seller to bring a foreclosure action.
- Deny the forfeiture and reinstate the rent to own agreement.
US Legal Forms offers state-specific contract for deed forms for rent to own homes, unlike other generic land contract forms and free rent to own forms available online. We have packages that include all the forms you need for a home for rent to own. Creating promissory notes alone won't protect the parties. Our contract for deed package includes other forms you may need, such as notices of default in case the tenant has past due rent payments. Individual land contract forms are also available.