What is a contract for deed? Seller financing in which the buyer pays instalments and takes possession, but the seller keeps legal title and hands over the deed only after the last payment.
A contract for deed is seller financing without a mortgage in the middle of it. The buyer moves in and pays the seller directly over a term of years; the seller stays on the record as legal owner and signs the deed only when the balance is paid. In between, the buyer holds what the law calls equitable title: the right to the property, and the duty to maintain it and pay the taxes and insurance, without the county record showing them as the owner. The same instrument is called a land contract, an installment land contract or a bond for deed, by state.
Every risk in it comes from the seller staying on the record. If the seller has a mortgage, the buyer's payments do not reach it, and a seller who stops paying can be foreclosed on with the buyer's years of instalments inside the loss; that mortgage's due-on-sale clause is usually triggered by the contract in the first place. Judgment liens, tax liens and even a second sale can attach to the seller's title while the buyer is paying. And forfeiture is the classic ending: where state law still permits it, a missed payment late in the term can end the buyer's rights outright, with no equity returned and no foreclosure procedure, which is why several states now force the seller through a foreclosure-style process instead.
Nevada mostly does this another way. A seller carrying the financing here conveys the deed at closing and takes back a promissory note secured by a deed of trust, so the buyer is the recorded owner from the first day and the seller holds the same non-judicial foreclosure remedy a bank would. It is cleaner on both sides and it is what title and escrow companies are set up to close. Where a contract for deed is used, recording it is the buyer's protection: a recorded contract puts the world on notice of the buyer's interest, so later liens and buyers take subject to it, while an unrecorded one leaves the buyer holding nothing the record can see.
A worked example
A seller carries $180,000 on a $210,000 house under a contract for deed at 8 percent over 20 years, about $1,505 a month, with the deed to be delivered at the end of the term. Four years and roughly $72,000 of payments later, the buyer learns the seller never stopped owing the $140,000 mortgage still recorded against the property and a notice of default has been filed. The contract was never recorded, so nothing in the county record shows the buyer's interest, and the remedy is a lawsuit against the seller rather than a place in the foreclosure.
Check what the county record says about the owner
Questions people ask
Is a contract for deed the same as rent to own?
No. A rent to own or lease option is a lease with a right to buy later at a set price, and the occupant is a tenant until they exercise it. Under a contract for deed the buyer is already the buyer, paying purchase instalments and holding equitable title, so a default costs equity rather than a deposit.
Can the seller keep the payments if the buyer defaults?
Where state law still allows forfeiture, yes, and that is the central objection to the instrument. Several states now require the seller to run a foreclosure or a statutory cure period first, and courts have refused forfeiture where a buyer had paid down a large share. The contract terms and the state decide it.