What you need to know about Contracts for Deeds:

• A contract for deed is a way property can be purchased by a buyer who doesn’t qualify for more conventional mortgage financing.
• With a contract for deed the buyer pays the purchase price to the seller in monthly installments of principal and interest (much like a mortgage payment) over the course of anywhere from a few years to 15 or 20 years or more.
• The seller will not deliver a deed to the buyer until the purchase price is paid in full. This puts a buyer at a disadvantage. He may spend years paying for property before he receives a deed.
• If the buyer fails to make the monthly payments, the contract may be terminated by the seller. The buyer will then forfeit all previous payments made to the seller and buyer’s rights in the property will be terminated.
• A contract buyer can protect his investment in the property by recording the contract in the land records. This will notify other parties that the buyer claims an interest in the property.
• The consequences to a buyer of defaulting under a contract for deed can be harsh, but if he is diligent about making timely payments he will eventually be the owner of the property.