What is a 'contract for deed'?

A 'contract for deed' refers to an arrangement where the buyer makes payments directly to the seller instead of securing a traditional mortgage through a bank. In this type of transaction, the seller retains the legal title to the property until the buyer has paid a specified amount or fulfilled the terms of the contract. This setup can be particularly beneficial in situations where a buyer may have difficulty obtaining financing through conventional means.

The direct payment structure allows buyers to establish ownership and equity as they make payments, while sellers can benefit from a steady income stream and retain security in the property until it is fully paid off. This option is often used in residential real estate transactions and is not limited to commercial real estate, highlighting its flexibility for individual buyers and sellers.