This final part of Key #1 discusses the contract for deed. As previously discussed, in traditional seller-financing, the investor takes ownership of the property. In a lease option, the seller retains ownership of the property. A contract for deed falls somewhere in between.

With a contract for deed, the seller retains “legal” title to the property. On county land records they will show up as the owner. The buyer gets “equitable” title to the property. This is the same as ownership and it’s not a tenancy like a lease agreement. The buyer gets partial ownership in the house, shared with the seller.

A contract for deed is an installment contract, just like you get when you buy a car with bank financing. The bank actually owns the car and keeps possession of the certificate of title, while the buyer gets to use the car. The buyer makes monthly payments and at the end of the contract, the bank transfers title to the buyer and mails the certificate.

In a contract for deed on real property, the seller keeps and owns the title while the buyer gets to use and occupy the property. The buyer makes some monthly payment and at the end of the contract, then the seller transfers legal ownership to the buyer by recording a transfer deed.

Even though the buyer does not own the house, she does own the equity growth. So, she does have more rights to the property than in a lease option, but not as many rights as she would get in traditional seller-financing deals.

It’s this middle ground that can cause problems with this type of deal. And there many problems for both the buyer and seller that I can’t list here. I always recommend that you be highly educated before using a contract for deed to either buy or sell real estate. It’s usually my last option as the other ways are more secure and avoid most, if not all, of the problems.

Now that you have an understanding of the 4 major types of seller-financing structures, we’ll get to Key #2 next week: What documents to you need?

For more information, please see my website link below!

Jeffrey S. Breglio, Esq.
Breglio Law Office and REI Mastery U
www.reimasteryu.com
jeff@bregliolaw.com
(801) 560-2180