Contract for deed

Contract for deed

A Contract for Deed is often used as an alternative means of financing the purchase price of property. The buyer does not receive an actual deed until payments are made under the terms of the Contract for Deed agreement.
If you have been wondering how to purchase a house but can't qualify for a mortgage, a contract for deed may be right for you. A contract for deed is a lease of real property in which the payments can ultimately be applied to purchase of the property. The deed isn't transferred until the agreed upon total payments have been made. Therefore, it is a form of seller financing, and rent paid may be thought of as installment payment toward purchase of the property. It is also referred to as a rent to own lease agreement or land contract.
If you own a home or other real estate that has been on the market a long time, or are looking for how to purchase a house but unable to get mortgage financing, a contract for deed may be what you need. In essence, a rent to own contract is created in which the tenant/buyer agrees to pay an installment payment in the form of rent, as specified in the contract for lease agreement. On the date for final payment in the rent to own agreement, the specified total purchase price will have been paid. When the agreement has been fulfilled, then the owner/landlord transfers a quit claim deed or warranty deed to the buyer/tenant.

If the buyer fails to complete the terms of the agreement, there may be forfeiture of the payments made. However, the buyer and seller may include terms in a contract for lease agreement for handling late payments to avoid forfeiture of the buyer's equity. The local real estate recorder's office should be contacted for information and policies for filing purchase contracts for rent to own homes.

When the buyer's payment is past due on a land installment sales contract, the seller has the right to enforce the lease agreement. It will be a matter of determination for the court based on the facts in each purchase agreement. The court may either:
Strictly uphold the terms of the agreement, making the buyer vacate the property, allowing forfeiture of the buyer/tenant's equity in the property.
Declare the buyer in default, but give the buyer a deadline to cure the default and pay off the balance owed or vacate.
Declare forfeiture unfair and make the seller return part or all of the installment payments made under the purchase contract for the house.
Interpret the agreement as really being a mortgage, and force the seller to bring a foreclosure action.
Deny the forfeiture and reinstate the rent to own agreement.By Dave Ramsey


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