What is a "contract for deed"?

A "contract for deed," also known as a land contract, is an arrangement where the seller finances the sale of a property for the buyer. In this scenario, the buyer makes regular installment payments directly to the seller over a specified period of time. Although the buyer is usually allowed to occupy and use the property during this period, the seller retains legal title to the property until the full purchase price has been paid off.

This setup differs significantly from a lease agreement, where no ownership is transferred and rights are limited to the terms of the lease. It is also not akin to a mortgage, where title typically transfers immediately but is subject to the lender's interest. Additionally, a down payment agreement suggests a preliminary stage of a purchase rather than the ongoing payments associated with a contract for deed. Therefore, the correct understanding revolves around the seller maintaining title while allowing the buyer to make payments, ultimately leading to ownership upon completion of those payments.