Contracts for Deeds
Assume you have a listing and you receive a contract. The buyer offers to purchase the house in 10 equal payments, instead of one lump sum. The seller wants to hold onto the deed until the last payment is made. An arrangement such as this is known as “contract for deed”. The seller will not sign the deed or convey the property until the payments are made. Although these arrangements are possible, they come with a lot of risks for buyers and sellers. The buyers will never really own the property and are essentially tenants until the last payments are made. What if the buyer wants to make improvements? Who gets insurance?
There are also risks for the sellers. Because Florida is a judicial foreclosure state, this arrangement would be interpreted as a loan and the seller would have to foreclose to get the property back. The primary reason a seller would want a contract for deed is so they can keep the property in the event the Buyer fails to make payments. However, the courts wouldn’t allow the seller to just take back the property. Therefore, they are put in the same position as a lender and if that’s the case, it’s better to have appropriate loan documents.
These arrangements are risky and come with a lot of issues. Therefore it is important to speak to an attorney before entering into such arrangement. The law offices of Nishad Khan P.L. are experts in real estate law and can help you navigate these tricky legal situations.