Those who would rather not apply for a mortgage, either because they do not qualify or for any other reason, can use a Contract for Deed to purchase property directly from the seller. A Contract for Deed establishes a legal agreement between a buyer and seller regarding the purchase of a property. This contract states that the buyer will purchase the property from the seller for payment installments that they pay over a period of time. The seller retains ownership of the property until receiving the final installment, after which ownership transfers to the buyer.
With this type of arrangement, buyers avoid closing costs and other costs of a traditional mortgage loan. If the buyer defaults on the payment, the seller can terminate the Contract for Deed without returning the money collected thus far, although that can be negotiated in the contract. It is possible for properties to change hands faster using a Contract for Deed than with a traditional mortgage loan.
Depending on your state, a Contract for Deed may also be known as:
Individuals who want to purchase a property without turning to a traditional lender for a mortgage can enter into a Contract for Deed with the seller. A Contract for Deed is most popular with those who do not qualify for a mortgage because of an insufficient deposit, bad credit history, or low debt-to-income ratio.
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A Contract for Deed comes with a high degree of inherent risk for both the seller and the buyer. It has to use specific language to pass legal muster.
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The Contract for Deed requires the signature of the seller and the buyer. Notarizing the document is not necessary.
After you have generated your Contract for Deed on 360 Legal Forms, download and print copies. Both parties sign the Contract for Deed, after which they should each keep a signed copy of the document in their records.
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