CONTRACT FOR DEED

Written By Jennifer Wilson

Contract for Deed refers to a real estate transaction that takes place between a buyer and seller with no lender involvement. It can also be known as installment purchase contract, land contract or bond for deed. The buyer makes their payments directly to the seller. The Parties agree upon the home purchase price, the down payment, interest rate, amount of each monthly payment and length of time within the purchase will need to be completed. Once agreed, buyer takes possession of the property, but seller retains the title of the home until the final payment has been made and sale is fully executed.

There are a few reasons a seller and buyer may accept this arrangement:

  1. Helps avoid traditional financing
  2. Provides flexibility in terms
  3. Saves money on fees
  4. Speeds up the home sale process

There are a few cons in accepting this type of agreement:

  1. There are less rules or regulations with this type of arrangement
  2. Most of these contracts include a balloon payment. Buyers need to be prepared for this.
  3. If buyer fails to pay, this agreement may not be able to pursue foreclosure

There are some situations where the Contract for Deed is a great option for both parties involved. Make sure you seek legal council prior to accepting this type or arrangement and get assistance from a professional in drafting up the contract.

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