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Free Contract for Deed

Write a Contract for Deed to formalize the transfer of a real estate property. Use our detailed guidelines and user-friendly form-building tools to effortlessly create your document today.

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Last Update May 24th, 2023


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What is a Contract for Deed

A Contract for Deed is a versatile instrument that can be employed for the sale of various real estate property types, including residential, commercial, or raw land.

This type of legal document serves as a mutually agreed-upon arrangement between a buyer and a seller, in which the seller assumes the role of the financial provider. 

Serving as a viable alternative to conventional mortgage financing, Contracts for Deeds cater to those who, for various reasons, may find it difficult or prefer not to procure a mortgage via a traditional bank or financial institution. Instead, they can opt to make direct payments to the seller.

In the event of a default on payments by the buyer, the seller has the right to reclaim the property. Certain jurisdictions may require sellers to compensate the buyer for the fair market value of any property improvements and reasonable rent expenses upon repossession.

Other names for Contracts for Deed include:

  • Land contracts

  • Installment land contract

  • Bond for deed

How Does a Contract for Deed Work

Ordinarily, a Contract for Deed is an arrangement between a buyer and a seller, but it can also encompass multiple parties in a real estate transaction. Unlike a mortgage, a Contract for Deed sidesteps the need for a third-party lender, such as a bank or another financial institution.

To establish a legally binding Contract for Deed, both the buyer and the seller must reach a mutual consensus on key contract elements like the purchase price, penalties for late payment, and interest rate. The absence of agreed terms renders the contract non-enforceable.

Once the Contract for Deed is put into effect, the buyer starts paying the seller in regular installments, as per the agreed-upon timetable. During this phase, the seller retains the legal title to the property, with the buyer possessing the equitable title.

The monthly payments in a Contract for Deed are often similar to those of mortgage payments, with a certain amount contributing to the purchase price and the remainder covering the interest.

According to the contract stipulations, the buyer might have the option to make lump-sum payments toward the outstanding balance at their discretion.

Upon full payment of the purchase price by the buyer, the seller is obligated to transfer the legal title to the buyer through a property deed.

Given the diverse statutes governing Contracts for Deed across different states, it's important to acquaint yourself with the laws applicable to Contracts for Deed in your state before drafting your own document.

Our Contract for Deed template, combined with our step-by-step survey, will assist you in crafting a professional and legally binding document. 

It ensures that your form includes all the essential information necessary for validity and enforceability.

What to Include in a Contract for Deed

A comprehensive Contract for Deed should contain the following crucial components:

  • Purchase price: The contract won't be valid without a mutually agreed-upon purchase price.

  • Interest rate: The contract must indicate whether the seller will charge interest. To establish a legally acceptable interest rate, sellers need to comply with their jurisdiction's usury laws. 

  • Payment plan: The agreement must define a payment plan detailing the amount of each monthly payment, the date of the first payment, and the due dates for all subsequent payments. A down payment might be part of the plan.

  • Rights and obligations: The contract should specify which party bears responsibility for insurance and property taxes. It should also make clear that the buyer cannot transfer the purchase to another party and that the seller is obliged to transfer the property title once the entire price is paid.

  • Default protocol and penalties: The contract should clarify the procedure in case the buyer defaults, whether due to a violation of the agreement or late payments. This includes any late payment fees and a grace period to rectify the default. 

When preparing a Contract for Deed, remember to include these essential components to ensure a comprehensive and enforceable agreement.

Land Contract Buyer's Rights

The Land Contract buyer has certain rights that are typically associated with this type of agreement. 

The following are some key rights enjoyed by the buyer in a Land Contract:

  • Equitable title: The buyer holds the equitable title to the property, which means they have a beneficial interest and can occupy and use the property during the contract period.

  • Control over property: The buyer has the right to make improvements or modifications to the property, subject to any restrictions outlined in the contract.

  • Default grace period: In the event of a default, the buyer usually has a grace period within which they can rectify the default and continue with the contract.

  • Option to purchase: Depending on the terms agreed upon, the buyer may have the option to purchase the property before the contract's scheduled completion.

  • Right to rescission: In certain jurisdictions, the buyer may have the right to cancel the contract within a specified timeframe after signing it.

  • Fair treatment: The buyer has the right to fair treatment throughout the transaction, including being provided with accurate information about the property and any potential issues or defects.

  • Right to legal representation: The buyer has the right to seek legal advice and representation to ensure their rights are protected and the contract is in their best interest.

Note that specific buyer rights may vary based on the terms of the individual Land Contract and applicable laws in the jurisdiction where the transaction takes place.

Advantages and Disadvantages of a Contract For Deed

When considering a Contract for Deed, it is important to weigh its advantages and disadvantages to make an informed decision regarding this method of real estate transaction.

Advantages for Sellers Advantages for Buyers
Higher purchase price potential Easier qualification process
Additional income through interest Flexible financing options
No need for third-party lender Potential for homeownership
Greater control over the property Lower closing costs
Option for steady income stream Option for creative terms
Disadvantages for Sellers Disadvantages for Buyers
Potential default by buyer Limited legal protections
Risk of buyer default Potential risks for buyers
Potential legal disputes Seller retains legal title
Limited pool of potential buyers Limited refinancing options
Potential maintenance obligations Potential for seller default

Contract for Deed vs Mortgages

Understanding the distinctions between a Contract for Deed and a mortgage is essential for navigating real estate transactions effectively.

Mortgage Contract for Deed
Involves a contract between a buyer and a third party, such as a bank or financial institution. Involves a direct agreement between a buyer and seller.
Imposes stricter requirements on buyers. Features fewer qualifications for buyers.
Offers stronger protections for both buyers and sellers. Provides relatively fewer protections for both buyers and sellers.
Generally entails higher closing costs. Typically incurs lower closing costs.
Grants the buyer legal title to the property. Grants the buyer equitable title to the property.

Contract for Deed Example

If you're new to writing a Contract for Deed and would like some guidance, it can be helpful to review an actual example. This allows you to familiarize yourself with the structure and terminology commonly used in such documents.

Take a look at our provided Contract for Deed sample below. It will give you a clearer understanding of how your final document should be structured and what elements it should include.

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Other Real Estate Documents

Other legal documents might prove beneficial when handling real estate property. You may find the following forms advantageous:

FAQs About Contracts for Deed

Before crafting your Contract for Deed, it's vital to understand its necessary components thoroughly. 

If you're uncertain about any details, read our FAQs below to gain more insight

Who Pays the Deed Tax?

Generally, the party responsible for paying the deed tax is negotiable and can be outlined in the contract terms. It is common for the buyer to bear the cost of the deed tax, but this can be subject to negotiation and may differ based on local laws and practices. 

Both parties need to clarify and agree upon this matter when drafting the Contract for Deed.

How Can I Get a Contract for Deed Template?

Acquiring a Contract for Deed can be a straightforward process. While consulting with a real estate lawyer is an option, it often entails high fees. 

Alternatively, you can utilize our expertly crafted and customizable template, which offers a cost-effective solution. With our template, you have the flexibility to tailor the document to your specific requirements, ensuring a comprehensive and legally sound Contract for Deed.

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