Contract for Deed: What It Is and How It Works in Real Estate

When you buy a home through a contract for deed, a legal agreement where the seller finances the purchase directly, and the buyer gains ownership only after full payment. Also known as a land contract, it’s a way to buy property without going through a traditional bank. This isn’t a rental. You live in the home, pay taxes, and make repairs — but the seller holds the title until you’ve paid everything off.

A contract for deed, a legal agreement where the seller finances the purchase directly, and the buyer gains ownership only after full payment. Also known as a land contract, it’s a way to buy property without going through a traditional bank. This isn’t a rental. You live in the home, pay taxes, and make repairs — but the seller holds the title until you’ve paid everything off.

Many buyers use this when they can’t qualify for a mortgage — maybe due to low credit, irregular income, or recent bankruptcy. Sellers like it because they get steady payments and often earn higher interest than a bank would pay. It’s common in rural areas, with family sales, or when the seller wants to move quickly. But it’s risky. If you miss a payment, the seller can cancel the contract and take back the home — often with little recourse for you. And if the seller has an existing mortgage, they could be in violation of their own loan terms.

There’s a big difference between this and a regular mortgage. In a standard deal, you get the title right away and pay the bank. Here, you get no title until the final payment. That means you can’t refinance, sell, or take out a home equity loan until the deed is transferred. Some buyers get trapped because they’ve paid for years but never got the paperwork. Always get a lawyer involved. Review the contract. Make sure it clearly says when and how the title transfers. Ask for a payoff statement. Get proof of insurance and tax payments. Don’t trust verbal promises.

Some states have special rules for these contracts. In places like Minnesota or Texas, there are strict disclosure rules and cooling-off periods. In others, it’s mostly unregulated. That’s why you need to know your local laws. Even if you’re buying from a relative, treat it like a business deal. Document everything. Keep copies of every payment — receipts, bank statements, canceled checks. Never pay in cash without a signed receipt.

It’s not for everyone. But for those who can’t get a bank loan or want to avoid closing costs, it’s a real option. The key is knowing the risks and protecting yourself. The posts below show real cases — from buyers who lost everything because they didn’t read the fine print, to sellers who used this to help family members get into homeownership without a bank in the middle. You’ll also find guides on how to write a fair contract, what to look for in the terms, and how to avoid scams that prey on people desperate to own a home.