What is Contract for Deed Used for?
A contract for deed is a form of seller financing in which the seller agrees to apply the rent paid to the purchase of the property for sale. It is in essence a rent to own deal. A contract for deed is also sometimes referred to as a land contract. Buyers don't receive the deeds for sale of the property until all of the payments as agreed to in the contract for deed form have been made. Until then, the buyer is basically in a landlord and tenant relationship with the seller, and the installment payments toward purchase of homes are similar to rent. Contract for deed houses are often ones that have been on the market for a while, so the seller is willing to entertain buyers who aren't able to get a traditional loan.
Tips for a Smooth House Property Sale
- Land contract home buyers may be at risk of losing their equity if they fall behind in payments. If the buyer fails to make a timely payment, it's possible for sellers of contract for deed homes to hold the buyer in default and declare the agreement broken, freeing the seller of the obligation to transfer the deed. One way to avoid forfeiting the payments already made if there's a failure to make a timely payment is to include terms for a late charge in the contract template. The agreement in contract forms may also allow a grace period to allow the buyer to catch up on the overdue payment without being held in default of the contract for deed.
- Contracts for a house sale or other property sale need to be in writing to be enforceable.
- Deeds for sale of a home need to be filed in the land recorder's office. However, the deed shouldn't be transferred in a home contract until the payments are complete.
- Sellers financing the sale can perform a background and credit check on a potential buyer.
The sale on contract for deed homes should use professionally drafted agreement forms. US Legal Forms offers state-specific contract for deed template forms that comply with state laws. We also offer a land contract package that includes the required disclosures, along with accounting forms and other helpful forms and notices.