What is a Contract for Deed Purchase?
Contract For Deed
I recently received an inquiry asking for help understanding what is a Contract for Deed. Please understand that you should always consult an attorney for legal advice and their perspective on the mechanics of this process.
That being said, essentially a Contract for Deed, or Land Contract, Contract Sale, etc is an arrangement whereby the seller holds title to the property until the buyer makes all the payments required by the contract/agreement. Should the buyer default during the prescribed time period, monies paid to the seller are essentially treated as rent and no equity is accrued by the buyer.
This type of arrangement can be used when a buyer has little or no down-payment funds and a seller has no need for the equity in the property being sold and can, in essence, finance the buyer’s purchase. Typically buyer and seller agree on a price for the property and terms of purchase. Usually a portion of the monthly payment made by the buyer to the seller is credited towards the purchase price of the property for a period of time. During the period of the contract, the Buyer makes installment payments on the purchase price and is entitled to possession and equitable title to the property. The Seller holds legal title and continues to be liable for payment of any underlying mortgage.
There are alternatives to this type of purchase vehicle including FHA loans and other type of arrangements. Contact me for additional information. The links below are for additional information on the subject.
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