A Contract for Deed (C4D) is a way to sell and purchase real estate on an installment basis. It is perhaps most often used in residential real estate where the buyer cannot otherwise obtain traditional bank financing, and the seller is willing and able to in effect act as the buyer’s “banker” for the transaction.
A C4D is really a contract for the delivery of a Warranty Deed for the property. In a C4D the seller retains fee ownership, subject to the interest of the C4D buyer. The buyer is entitled to possession, and is required by the terms of the C4D to pay monthly payments to the seller, which will normally include interest at some agreed upon rate. In addition, the buyer is required to pay insurance and real estate taxes.
Typically, the C4D will have a maturity date of three to seven years, at which time the buyer will hopefully be able to obtain financing to pay off the C4D, or obtain an extension of the C4D, from the seller. Upon payment in full, the seller is required to give the buyer a Warranty Deed and the buyer is then the full and complete owner.
When C4D are used in the right situation, they provide a valuable alternative to traditional financing. However, buyers also need to be aware of the consequences of default on the C4D.
Disclaimer: This article is for general informational purposes only and is not legal advice. For legal advice regarding your particular situation, please retain an attorney as soon as possible so as to not lose any legal rights you may have.