What we verified in “Contract for deed (land contract): the risks”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. According to the CFPB, in a contract for deed the seller keeps legal title to the home until the buyer makes all the payments; even under another name, such as 'bond for deed', 'land installment contract' or 'buying on contract', the idea is the same: a purchase on an installment plan rather than a traditional mortgage loan; the buyer pays the seller in monthly installments instead of borrowing from a separate lender; the deed represents legal ownership; and the buyer must act as the owner during the contract, so in a typical contract the buyer pays property taxes, insurance, repairs and maintenance.

   Sources 1 · What is a contract for deed? (last reviewed Sep 13, 2024): 'Contracts for deed are loans where the seller keeps the legal title of a home until the borrower makes all the payments'; 'bond for deed'; 'land installment contract'; 'buying on contract'; 'a purchase made on an installment plan rather than through a traditional mortgage loan'; 'the buyer agrees to pay the seller in monthly installments'; 'The deed represents legal ownership of the home'; 'you must act as the property owner during the term of the contract, even though the deed is not yours yet'; 'property taxes, insurance, repairs, and maintenance are paid by the buyer' · Checked October 17, 2026

2. According to the CFPB, some contracts for deed can provide a path to homeownership, but most carry risks; with a traditional mortgage the lender generally has to wait before starting foreclosure, while with a contract for deed the seller often tries to start eviction right away if you miss a payment, cannot make a large balloon payment the contract requires, or do not pay costs such as taxes and maintenance, and may try to keep all the money and work you put into the house; even if you make every payment, the seller may not have clear title (for example, owing money on a lien or mortgage on the property) or may refuse to turn over the deed; and sometimes the seller takes your money for taxes and insurance but does not pay them.

   Sources 1 · What is a contract for deed?: 'Some contracts for deed can provide a path to homeownership, but most carry risks'; 'the lender generally has to wait before starting foreclosure'; 'the seller often tries to start eviction right away'; 'Miss a monthly payment'; 'balloon payment'; 'Do not pay costs spelled out in the contract, like taxes and maintenance'; 'the seller might try to keep all the money and work you put into the house'; 'The seller might fail to tell you they don't have clear title to the home'; 'the seller might owe money on a lien or mortgage on the property'; 'simply refuses to turn over the deed'; 'Sometimes the seller takes your money for taxes and insurance but doesn't actually pay them' · Checked October 17, 2026

3. The CFPB recommends asking an expert, such as a HUD-approved housing counseling agency, before entering into a contract for deed; to complain about a problem you can file at consumerfinance.gov/complaint or call (855) 411-2372, choosing 'Mortgage', then 'Other type of mortgage', and typing 'contract for deed'.

   Sources 1 · What is a contract for deed?: 'Ask an expert before you enter into a contract for deed'; 'Talk to a HUD-approved housing counseling agency'; 'consumerfinance.gov/complaint'; '(855) 411-CFPB (2372)'; 'as the type of product'; 'Other type of mortgage' · Checked October 17, 2026

4. According to the CFPB, protections for contract for deed buyers vary from state to state; some states require contracts for deed to be registered, and even where it is not required you can file the contract with the state or local office in charge of land records, which entitles you to receive notices about the property, such as when the deed is transferred, a mortgage is taken out on the property or a lien is filed; some states require sellers to offer foreclosure-like protections before repossessing the home, which can give you more time to catch up; and for complaints about local individuals and companies it suggests looking up your state's attorney general.

   Sources 2 · Consumer advisory: Help is available for people facing housing problems because of a contract for deed (Aug 13, 2024; page last modified Jun. 25, 2026): 'Protections for buyers under a contract for deed vary from state to state'; 'In some states, contracts for deed require registration with the property clerk'; 'you can choose to file the contract with the state or local office in charge of land records'; 'This entitles you to receive notices about the property'; 'a mortgage is taken out on the property, or a lien is filed'; 'Some states require sellers under a contract for deed to offer foreclosure-like protections before repossessing the home'; 'more time to catch up on payments'; 'look up your state's attorney general' · Checked October 17, 2026

5. According to the CFPB report, during the contract the buyer typically takes on the responsibilities of an owner, including repairs, property taxes and improvements; contracts usually provide for forfeiture on any default, such as missed payments, letting the seller repossess the home and keep all accumulated equity and payments, including the down payment and improvements; and buyers often have a harder time exercising their rights because the contract showing their interest is not recorded.

   Sources 3 · Contract for Deed report (August 2024), p. 1: 'the borrower typically assumes the responsibilities of homeownership, including repairs, property taxes, and improvements'; 'The contracts usually provide for forfeiture in event of any default in the contract terms, such as missed payments'; 'retain all accumulated equity and payments, including the buyer's downpayment and improvements made to the property'; 'because the contract showing the buyer's interest is not recorded' · Checked October 17, 2026

6. According to the CFPB report, seller-financers often do not assess the borrower's ability to repay; many contracts for deed include inflated prices and higher interest rates than mainstream mortgages, and some have large balloon payments at the end; substandard housing can require expensive repairs paid for by the buyer; and title defects can keep the buyer from getting legal title or selling later.

   Sources 3 · Contract for Deed report, p. 1, 'Key findings': 'seller-financers often do not assess the borrower's ability to repay the loan'; 'Many contracts for deed include inflated home prices and higher interest rates than mainstream mortgages'; 'Some also have large balloon payments at the end of the term'; 'expensive repairs and improvements paid for by the borrower'; 'Title defects can limit the borrower's ability to assume legal title to the home or to later sell it' · Checked October 17, 2026

7. According to the CFPB report, mainstream purchase mortgages typically include an appraisal, a home inspection and a title search, and contracts for deed do not; mainstream mortgages disclose the interest rate and provide disclosures; legal title passes to the buyer at signing and the buyer may sell, take out another loan or refinance during the loan, which is not the case with a contract for deed; and mortgages come with pre-foreclosure review periods, foreclosure procedures before the property can be taken and a right to any surplus from the sale, which contracts for deed lack; buyers may also agree to prices without knowing the home's true value because appraisals are not required.

   Sources 3 · Contract for Deed report, pp. 6-7, Tables 1A-1D: 'Appraisals performed'; 'Home inspection performed'; 'Title Search Performed'; 'Interest rate disclosed'; 'Legal title transferred upon entering into'; 'Borrower may sell home, obtain secondary'; 'Pre-foreclosure review periods'; 'Foreclosure procedures occur before'; 'Borrower entitled to receive any surplus from'; p. 7: 'Borrowers may agree to the contract prices without knowing the true value of the homes, given that appraisals are not required for the transactions' · Checked October 17, 2026

8. According to the CFPB report, many contracts for deed let sellers evict buyers for any default, including a single missed payment or a lapse of insurance, and keep all payments and improvements; by contrast, lenders of most mainstream mortgages must wait 120 days after the first missed payment before starting foreclosure, which can allow time to catch up, refinance, sell or get a loan modification.

   Sources 3 · Contract for Deed report, p. 8: 'Many contracts for deed permit sellers to evict borrowers for any default, including a single missed payment or lapse of insurance'; 'sellers are generally entitled to retain all payments made by the borrower and any improvements the borrower has made to the home'; 'lenders of most mainstream mortgages must wait 120 days after the first missed payment before beginning the foreclosure process'; 'catch up, refinance the loan, sell the house, or obtain a loan modification' · Checked October 17, 2026

9. According to the CFPB report, many landowners and developers in the colonias near the Texas-Mexico border have offered financing through contracts for deed, which do not require the seller to show clear title, ensure needed infrastructure or guarantee that structures meet county building codes; and today these contracts are disproportionately concentrated in low-income, Black, Hispanic and immigrant communities.

   Sources 3 · Contract for Deed report, 4.4 Texas Border Colonias, p. 19: 'Many landowners and developers in the colonias situated near the Texas-Mexico have offered property financing using contract for deed loans'; 'would not require the seller to provide proof of a clear title, ensure the presence of needed infrastructure, or guarantee that existing structures on the land meet county building codes'; p. 2: 'disproportionally concentrated in low- income, Black, Hispanic, immigrant' · Checked October 17, 2026

10. In Ohio, every land installment contract is signed in duplicate with a copy for each party; it must include, among other things, the price, the down payment, the balance, the amount and due date of each installment, the interest rate, a statement of any encumbrances on the property, the seller's duty to deliver a deed at the end, a provision that the seller will have the contract recorded, and a provision that if the seller defaults on a mortgage on the property the buyer can pay it and get credit; the seller may not place a mortgage larger than the balance due without the buyer's consent; and within 20 days of signing the seller must have a copy recorded and deliver a copy to the county auditor.

    Sources 4 · Ohio Revised Code §5313.02(A): 'Every land installment contract shall be executed in duplicate'; 'The contract price of the property conveyed'; 'The amount of the vendee's down payment'; 'The amount and due date of each installment payment'; 'The interest rate on the unpaid balance'; 'A statement of any encumbrances against the property conveyed'; 'A statement requiring the vendor to deliver a general warranty deed on completion of the contract'; 'A provision that the vendor shall cause a copy of the contract to be recorded'; 'the vendee can pay on the mortgage and receive credit on the land installment contract'; (B): 'No vendor shall place a mortgage on the property in an amount greater than the balance due on the contract without the consent of the vendee'; (C): 'Within twenty days after a land installment contract has been signed by both the vendor and the vendee'; 'a copy of the contract to be delivered to the county auditor' · Checked October 17, 2026

11. In Ohio, the seller must give the buyer, at least once a year or on request (but no more than twice a year), a statement of the amount credited to principal and interest and the balance due; and if the seller does not comply with the law, the buyer can enforce it in court.

    Sources 4 · Ohio Revised Code §5313.03: 'at least once a year or on demand of the vendee, but no more than twice a year'; 'The amount credited to principal and interest'; 'The balance due'; §5313.04: 'the vendee may enforce such provisions in a municipal court, county court, or court of common pleas' · Checked October 17, 2026

12. In Ohio, when the buyer defaults, forfeiture can be enforced only after 30 days from the default, and the buyer avoids it by paying everything currently due plus the contract's fees within that period; the seller must then serve a written notice giving 10 days to comply; and if the buyer has paid for five years or more, or 20 percent or more of the price, the seller can recover the home only through foreclosure and judicial sale, receiving from the sale up to the unpaid balance.

    Sources 4 · Ohio Revised Code §5313.05: 'may be enforced only after the expiration of thirty days from the date of the default'; 'by making all payments currently due under the contract'; §5313.06: 'within ten days of the completed service of notice'; §5313.07: 'for a period of five years or more from the date of the first payment'; 'equal to or in excess of twenty per cent thereof'; 'the vendor may recover possession of his property only by use of a proceeding for foreclosure and judicial sale'; 'up to and including the unpaid balance due on the land installment contract' · Checked October 17, 2026

13. In Minnesota, contracts for deed signed on or after January 1, 1984, must be recorded within four months with the county recorder or registrar of titles; for a residential contract for deed, the seller must give the buyer at signing a copy with original signatures in recordable form and, within four months, pay any delinquent taxes needed to record it and record it; those requirements cannot be waived in the contract; and for this law a contract for deed does not include a lease with an option to purchase.

    Sources 5 · Minnesota Statutes §507.235, subd. 1: 'All contracts for deed executed on or after January 1, 1984, shall be recorded by the vendee within four months in the office of the county recorder or registrar of titles'; subd. 1a(a): 'deliver to the vendee a copy of the contract for deed containing original signatures in recordable form'; 1a(b): 'pay any delinquent taxes necessary for recordation of the contract for deed'; 1a(e): 'a lease, including a lease with an option to purchase'; 1a(g): 'The requirements of this subdivision may not be waived or altered by any provision in a contract for deed' · Checked October 17, 2026

14. In Minnesota, for contracts signed on or after August 1, 1985, to end the contract over a default the seller must serve a notice stating that the contract will terminate 60 days later (or the shorter or longer period the law sets in some cases) unless before then the buyer cures the default, pays everything due and certain costs.

    Sources 6 · Minnesota Statutes §559.21, subd. 2a: 'executed on or after August 1, 1985'; 'The notice must state that the contract will terminate 60 days, or a shorter period allowed or a longer period required in subdivision 4, after the service of the notice'; 'complies with the conditions in default'; 'makes all payments due and owing to the seller under the contract through the date that payment is made' · Checked October 17, 2026

15. On an FHA loan, the Minimum Required Investment (MRI) is the borrower's contribution in cash or its equivalent, of at least 3.5 percent of the property's Adjusted Value.

    Sources 7 · HUD Handbook 4000.1 (last revised 8/12/2026), II.A.2.c.ii, Minimum Required Investment: 'refers to the Borrower's contribution in cash or its equivalent'; 'at least 3.5 percent of the Adjusted Value of the Property' · Checked October 17, 2026

16. Freddie Mac says that, typically, you should be prepared to pay between 2% and 5% of the home purchase price in closing costs.

    Sources 8 · What Are Closing Costs and How Much Will I Pay?: 'Typically, you should be prepared to pay between 2% and 5% of the home purchase price in closing fees.' · Checked October 17, 2026

17. HUD-approved housing counselors give independent advice on buying, renting, defaults and credit, often at little or no cost.

    Sources 9 · Find a Housing Counselor: 'Housing counselors throughout the country can provide advice on buying a home, renting, defaults, forbearances, foreclosures, and credit issues'; 'they can offer independent advice, often at little or no cost to you' · Checked October 17, 2026

18. According to LSC, it is an independent nonprofit established by Congress to fund civil legal aid for low-income Americans; on its site you enter an address or city to find the nearest LSC-funded legal aid organization, and at LawHelp.org you can look up information about your legal questions and find free legal forms.

    Sources 10 · I Need Legal Help: 'LSC is an independent nonprofit established by Congress in 1974 to provide financial support for civil legal aid to low-income Americans'; 'enter an address or city below to find an LSC-funded legal aid organization near you'; 'You can also visit LawHelp.org to look up information about your legal questions and find free legal forms' · Checked October 17, 2026