Contract for deed (land contract)

Question 1

When is a contract for deed (land contract) used?

Answer 1

When the seller acts as the financier and when a buyer does not have sufficient cash to make a down payment large enough to secure traditional financing

A contract for deed is often used as an alternative financing option for buyers who may not qualify for traditional loans.

Question 2

In a contract for deed, what does the buyer agree to?

Answer 2

The buyer agrees to the purchase price

This agreement typically includes the total amount to be paid for the property over time.

Question 3

What does the buyer pay in a contract for deed?

Answer 3

The buyer makes a small down payment and then pays monthly payments to the seller

These payments function similarly to a mortgage, but the seller receives them directly.

Question 4

When does the buyer take possession in a contract for deed?

Answer 4

At closing

This means the buyer can occupy the property immediately after the transaction is finalized.

Question 5

What kind of title does the buyer get in a contract for deed?

Answer 5

The buyer gets equitable title

This type of title gives the buyer certain rights to the property, although legal title remains with the seller until all payments are made.

Question 6

What does equitable title entitle the buyer to?

Answer 6

Homestead protection

This protection can provide certain legal benefits and safeguards for the buyer’s residence.

Question 7

When does the buyer get the legal title in a contract for deed?

Answer 7

After the buyer has completed the agreed-upon payments

Legal title is transferred to the buyer once all financial obligations are fulfilled.