Definition
In a contract for deed, the buyer makes payments directly to the seller who retains legal title until the contract is satisfied. The buyer receives equitable interest (possession and control) but not legal ownership. It's seller financing without institutional involvement.
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Contracts for deed are seller-financed arrangements common in some states and regions. Similar to land contracts, the buyer receives equitable interest in the property but the seller retains legal title until contract satisfaction. Contracts for deed specify payment terms, interest rates, and conditions. If the buyer defaults, the seller can typically reclaim the property more quickly than in a traditional mortgage foreclosure. Some states have protections for contract-for-deed buyers; others have minimal regulation. Buyers should ensure properties are insurable and financed under contract-for-deed terms.
Pro Tip
Before entering a contract for deed, verify the seller has clear title and the property is insurable; these arrangements have fewer protections than mortgages.
Example
A seller and buyer negotiate a contract for deed where the buyer pays $1,500 monthly for 20 years at 5% interest; upon final payment, the seller delivers the deed.