Contract for Deed
Definition and meaning of Contract for Deed in real estate.
A contract for deed is an owner-financing arrangement where the buyer makes regular payments to the seller to purchase a property, but the seller retains the legal title until the loan is paid in full. The buyer receives equitable title and the right to occupy the property during the payment term.
In more detail
This type of contract is often used by buyers who cannot qualify for a traditional bank mortgage due to poor credit history or self-employment. Because the seller keeps the legal title, they can easily reclaim the property if the buyer defaults on payments, often without going through a formal foreclosure process.
However, this structure carries substantial risk for buyers, who may lose all their equity if they miss a single payment. Laws governing these contracts vary by state, with some states offering buyers more protections than others.
Key facts
| Category | Real Estate Investing |
|---|---|
| Also known as | Land contract or installment land contract |
| Title status | Seller retains legal title; buyer holds equitable title |
| Default risk | Buyer can lose all payments and equity if they default |
A seller agrees to let a buyer move into a home immediately and pay monthly installments over a set number of years, after which the seller will sign over the deed.
Frequently asked questions
Who is responsible for property taxes in a contract for deed?
Typically, the buyer is responsible for property taxes, home insurance, and maintenance, even though the seller still holds the legal title.
Can a buyer refinance a contract for deed?
Yes, buyers often refinance the contract for deed by obtaining a traditional bank mortgage to pay off the remaining balance and secure the legal title.
Related terms
Sources & references
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