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A contract for deed, or a land contract, is a legal contract relating to real estate. It is used when the seller of a property will provide the buyer with financing for the purchase of the property. The buyer will make installment payments to the seller until the purchase price of the property, and any interest, has been paid off. During this financing process, the seller retains the title for the property.
This contract will require information about the buyer and seller and also about the property that is being sold. If there is another third party involved, this party's information should be included as well. Because a contract for deed may be a legally binding document, it should always be checked for accuracy and professionalism.
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A contract for deed is a legally-binding document between the buyer and seller of “real property” wherein the seller agrees to provide financing for the transaction. Contract for deed templates are most often used in a “rent to own” residential rental agreement, or as an alternative to a traditional "mortgage" sale transaction. In this situation, payments will be made according to the contract until the seller receives the agreed upon purchase price. Then, if all provisions of the contract for deed have been met, the buyer gains the title to the property and becomes full owner.
In recent years, contract for deed agreements have become more and more common. This is due in large part to current economic environments, in which potential buyers may not have a sufficiently high credit score or down payment for a traditional bank mortgage. When property owners need to sell a property quickly, or like the idea of receiving monthly payments from the buyer for the property, they may use a deed contract to solidify the arrangement and make it legally binding. Although there are some potential downfalls for the buyer purchasing real property with the use of a contract for deed form, the deed contract form allows many families to purchase a home when they may not otherwise be able to do so.
There are many important things that both the buyer and seller should know before using a contract for deed form. First, contract for deed templates only apply to what is known as “real property” – real estate and any immovable property existing on that real estate. Although this most commonly refers to a house, it can also include any outbuildings, wells, ponds, roads and more. Contract for deed forms are also known as a land contract, agreement for deed, land installment contract or installment sale agreement. Regardless of what they are called, any contract for deed form has the same legal benefits, provisions and potential consequences.
While an executed, contract for deed form can have the same end result as a traditional mortgage , there are fewer protections for the potential buyer and more benefits for the seller in the event that the contract provisions are not met. The buyer does, however, enjoy some notable benefits from the contract for deed template. There is no lengthy application or loan process to go through, and there is no prohibitively high closing, origination or settlement costs. Many contract for deed form papers are modified so there is a substantial down payment, and a balloon payment at the end of the contracted period that finalizes the purchase of the property.
Probably the most important thing to note about a deed contract is that it is very much a typical rent to own type of arrangement. The seller holds the title until the amount of the contract for deed is filled. Even though the buyer may pay the monthly amount for years, he or she does not own any interest in the property until the contract is completed and the title signed over. If the buyer defaults on the terms of the contract, or does not pay the monthly payment, he or she can be evicted from the property fairly quickly. Thus, it is important to understand the realities of the contract for deed before either party enters into the agreement.