Contract for Deed

In depth

A contract for deed is an installment sale in which the seller acts as the lender. The buyer occupies the property and pays principal and interest directly to the seller, but the seller keeps recorded legal title until the final payment is made. The buyer holds equitable title and is generally responsible for taxes, insurance, and maintenance during the contract term. Contracts for deed are popular for buyers who cannot qualify for conventional mortgages and for sellers who want monthly cash flow plus interest income. A common misconception is that the buyer has no rights until paid in full; in reality, equitable title gives the buyer real ownership interests enforceable in court. Practically, buyers should always record a memorandum to put the world on notice of their interest, and sellers should comply with Dodd-Frank, state usury rules, and any state-specific consumer protections.