Generate A Contract For Deed with LegalZone

What Is a Land Contract for Deed?

Also called a land contract, a land sale contract, a land purchase agreement, or a simple land contract purchase agreement, a land contract for deed is used when a property is sold, but the seller keeps the title for a certain period of time.

With a contract for deed, the buyer has the right to use the property immediately but doesn’t receive the title until they make a series of payments to the seller.

Land contracts are a popular option for buyers who cannot get financing through a financial institution, and the seller can offer their own form of financing to the buyer.

Is There a Difference Between a Contract for Deed and a Land Contract?

No, these two phrases can be used interchangeably.

When Do You Need a Contract for Deed?

If the seller gives the buyer a personalized financing offer, you should use a contract for deed.

Commonly, buyers aren’t approved for traditional financing methods due to a low credit score, an insufficient down payment amount or collateral, employment situation, or amount of personal debt. A contract for deed allows the seller to close a deal with this person by giving them the option of month-to-month financing.

What Should Be Included in a Contract for Deed?

Names and contact information of the buyer and seller
The property address
The price of the property
The negotiated payment plan
Who covers property insurance
Who covers property tax
Calculation of loan interest
Penalties for late payments
Default procedures

How Do You Figure Out the Monthly Payments?

Even though the contract for deed is a private loan, most owners determine monthly payments much like a traditional mortgage. Some of the monthly installments will pay off the owed amount, and the rest will be put towards interest.

An attorney can help you figure out the current rates for interest in your area so you have an idea of what to expect.

What Is a Purchase Default?

A purchase default is a safety measure to ensure that the buyer doesn’t infringe on the contract. A standard purchase default is that the buyer has to pay a late fee if they don’t pay their installment on time. If reparations aren’t made immediately, the seller can threaten eviction unless the payments are made.

What Are the Disadvantages of a Contract for Deed?

A significant drawback of using a contract for deed is that the buyer is at the seller’s mercy. If the seller still has a mortgage to pay and defaults on their mortgage, then the buyer can lose the house through no fault of their own.

A vague contract can cause a lot of issues for a land purchase agreement. It’s essential to collaborate with a lawyer to check that everything is bulletproof and you’re getting fair rates.

Since contracts for deed are private loans, the seller can set the interest rate as high as they’d like. They know the buyer can’t choose a traditional financing method and tend to jack up the interest rate as a safety precaution against a high-risk buyer.

On top of all that, the buyer won’t have complete ownership of the house until all payments are made. The seller retains the title until the loan is repaid, and this can be tricky when filing for insurance or settling any legal disputes.

What Does Contract for Deed Mean in Real Estate?

In real estate, a contract for deed is a legally binding document that passes possession of a property from the seller to the buyer. However, the seller retains possession of the lease until the buyer finishes paying their monthly installments.

Create Your Contract for Deed with LegalZone

When you’re looking to sell property with seller-financing, it’s crucial to have a comprehensive contract for deed. At LegalZone, we make it affordable and accessible for anyone and everyone to get the legal documentation they need.

You can use our template to build your own contract for deed if you’re ready to jump right in.

If you have more questions, an attorney can help you figure out if a contract for deed is the right option for you and what you need to include in your document.

Start Your Contract for Deed