What is a Contract For Deed?
If the owner of a property wishes to sell the property to a buyer and wants to finance the sale, he or she will need to use a Contract for Deed. This type of agreement which allows the Seller to transfer the title of the property to the Buyer while retaining the title is also known as a Real Estate Instalment Agreement, Contract Sale, Land Contract or Agreement for Deed.
1 – Under a Contract for Deed, once the Buyer has made all the payments specified in the agreement and met all other obligations, the Seller must transfer a valid legal title through a Deed.
2 – Through a Contract for Deed, the Seller finances the property that is being sold while keeping the title or deed as security. The Buyer will make payments in instalments for the duration of the Contract for Deed and is allowed possession of the property, while the
3 – Seller will remain liable for any existing mortgage on the property.
Some of the advantages of Contracts for Deed are that the closing costs associated with this type of transaction are usually lower than transactions involving mortgages, banks or other institutional type lenders.
Additionally, this type of Agreement can be useful when other financing may not be even available to Buyer.
These are just some of the important provisions included in this Contract for Deed:
Parties: Identifies the Seller and Buyer involved in the transaction
Price and Payment: Sets forth the price for the property and when and how payments are to be made
Security: Explains that the Contract stands as security for the performance and payments by Buyer
AS-IS condition of Property: Buyer will accept the property AS-IS
Deed and Evidence of Title: Promise that seller will deliver a general warranty deed after buyer fulfills his or her obligations
Title: Assurance that title will be free and clear of all encumbrances
Taxes and Assessments: States that Buyer will pay all taxes and assessments
Risk of Loss and Insurance: Assigns the risk of loss by negligence, fire or other casualty
Prepayment: Explains what happens if the Buyer prepays
Possession of Property: Buyer shall have possession of the property as long as all contract terms are complied with
Default by Buyer: Consequences of default by Buyer
Maintenance of Property: States that Buyer will maintain property
Mortgage by Seller: Explains that Seller may place a mortgage on the property
Conveyance by Seller: Seller may convey his or her interest in the property
Joint and Several Liabilities: If there is more than one Buyer, all will be jointly and severally liable
Reinstatement after Acceleration: Buyer may reinstate this Contract in the event of default and acceleration according to law
Assignment of Sale by Buyer: States that Buyer will not assign his interest in the property without consent of the seller
Disputes: Allows the parties to select how to handle disputes