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Frequently Asked Questions

What is a Contract for Deed?It is a contract for the purchase of real property (real estate) in which the seller retains the deed (title) to the property until the buyer makes payments in installments equal to the agreed upon purchase price. The purchaser has an immediate right to possession of the property, but the vendor defers delivery of the deed (transfer of title) until they have secured all or part of the purchase price.

A Contract for Deed is useful when a buyer is unable to obtain financing other than seller financing.
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CONTRACT FOR DEED

THIS CONTRACT FOR DEED (this "Agreement") dated this 21st day of December, 2014

BETWEEN:


_________________________ of ________________________________________


(the "Seller")

OF THE FIRST PART

- AND -


_________________________ of ________________________________________


(the "Purchaser")

OF THE SECOND PART

IN CONSIDERATION OF the covenants and agreements contained in this Agreement and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties to this Agreement agree as follows:

  1. Sale of Property
  2. On the 21st day of December, 2014, the Seller, for and in consideration of the sum of $0.00, does hereby convey and grant with warranty covenants to the Purchaser, all of the following lands and property, together with all improvements located on the property:

    ___________________________________________________________
    ___________________________________________________________
    ___________________________________________________________
    ___________________________________________________________
    ___________________________________________________________
    ___________________________________________________________
    ___________________________________________________________
    ___________________________________________________________
    ___________________________________________________________
    ___________________________________________________________
    (the "Premises").

  3. Purchase Price
  4. The purchase price (the "Purchase Price") of the Premises is $0.00.  The Purchaser agrees to pay $0.00 upon execution of this Agreement and the balance of the Purchase Price being payable in monthly installments of $ 0.00, due on the __________ of each month, beginning on December 21, 2014 until the Purchase Price is paid in full.  
  5. Interest Charges
  6. Interest of 0% per year will be computed monthly and deducted from the monthly payments.  The balance of the monthly payment will be applied to the principal amount of the Purchase Price outstanding.  
  7. Property Taxes and Assessments
  8. For the duration of this Agreement, the Purchaser will be responsible for all taxes, and assessments levied against the Premises.  
  9. Insurance
  10. The Purchaser is not responsible for insuring the Seller's contents and furnishings in or about the Premises against either damage or loss and the Purchaser assumes no liability for any such damage or loss.
  11. The Purchaser is hereby advised and understands that the personal property of the Purchaser is not insured by the Seller for either damage or loss, and the Seller assumes no responsibility for any such damage or loss.  The Purchaser is advised that, if insurance coverage is desired by the Purchaser, the Purchaser should inquire with the Purchaser's insurance agent regarding a personal contents policy of insurance.  
  12. The Purchaser is hereby advised and understands that the Premises is not insured by the Seller for either damage or loss to the structure, mechanical or improvements to the Premises, and the Seller assumes no responsibility for any such damage or loss.  The Purchaser is advised that insurance coverage is required by the Seller, and the Purchaser should inquire with the Purchaser's insurance agent regarding a  policy of insurance for the Premises and provide a copy of such policy to the Seller once it is in place.  Failure to insure the Premises is a violation of this Agreement and may result in the termination of the Agreement.  
  13. The Purchaser is responsible for maintaining liability insurance on the Premises for the benefit of both the Purchaser and the Seller, and the Purchaser assumes liability for any damage or loss arising from the liability of either the Purchaser or the Seller.  
  14. For any required insurance of the Purchaser stipulated in this contract, the proof of insurance will be furnished to the Seller upon renewal of such insurance within two weeks of renewal.
  15. Purchaser's Default
  16. In the event of the Purchaser's failure to perform any covenant or condition contained in this Agreement, the Seller will give the Purchaser a notice of default. The notice will give the Purchaser 14 days from the date the notice is received to remedy the default.  If the Purchaser fails to remedy the default within 14 days, then the entire balance of the Purchase Price, including interest payable, will become due immediately after the fourteen (14) day period to remedy the default expires (the "Notice Period").   Failure to pay the full amount of the Purchase Price owing will result in the termination of this Agreement at the end of the Notice Period.
  17. The Purchaser and the Seller agree that in the event that the Purchaser fails to remedy a default and this Agreement is terminated, the Purchaser will vacate the Premises within 0 days of the Agreement terminating.  The Purchaser and the Seller further agree that failure of the Purchaser to vacate within that period gives the Seller a right to maintain an action to obtain vacant possession of the Premises.  
  18. In the event of default and termination of this Agreement by the Purchaser, the Purchaser forfeits any and all payments made under the terms of this Agreement, including but not limited to all payments made towards the Purchase Price, and any and all taxes, assessments, or insurance premiums paid by the Purchaser, as liquidated damages for breach of this Agreement.
  19. The Seller reserves the right to recover damages resulting from the willful acts or negligence of the Purchaser.  
  20. Seller's Right to Reinstate Agreement After Default
  21. In the event of the Purchaser's default and the termination of this Agreement, the Seller, at his sole discretion, will have the right to reinstate this Agreement.  In exercising his discretion, the Seller may require the Purchaser to:

    (i)  pay all amounts due and owing under this Agreement had the Agreement not been terminated;

    (ii) cure any defaults that have occurred; and

    (iii) pay all expenses incurred by the Seller in enforcing their rights under this Agreement.
  22. All payments made under the preceding provision must be made in a form acceptable to both parties.  
  23. Assignment or Sale of the Premises
  24. The Purchaser may not sell, assign, transfer, convey, encumber, or otherwise deal with any interest in the Premises without the written consent of the Seller.  
  25. Deed and Evidence of Title
  26. Upon payment of the full Purchase Price, including all taxes, assessments, interest, and other charges due to the Seller, the Seller agrees to deliver to the Purchaser, within a reasonable amount of time, a Warranty Deed to the Premises in the name of the Purchaser, free and clear of all liens and encumbrances.
  27. Notices
  28. All notices required to be sent under this Agreement will be sent by pre-paid registered mail to:

    If to the Purchaser:

    _________________________ of ________________________________________.


    If to the Seller:

    _________________________ of ________________________________________.

  29. Charges for Late Payment
  30. In the event the Purchaser pays a monthly installment payment after it becomes due, there will be a late fee of $0.00 assessed to the Purchaser as a reasonable pre-estimate of the Seller's loss as a result of the late payment.  Such fees will be deducted from any payment to the Seller before being applied against the monthly installment owing.  
  31. Conveyance or Mortgage by Seller
  32. The Seller reserves the right to encumber the Premises with a mortgage.  The Seller agrees to meet the obligations due under the mortgage and to provide proof of the same to the Purchaser upon the written demand of the Purchaser.  
  33. The Seller reserves the right to convey their interest in the Premises, subject to this Agreement.  Such conveyance will not be cause for termination of this Agreement.  
  34. Security
  35. This Agreement will act as security for the performance of all of the Purchaser's obligations under this Agreement.
  36. Time of the Essence
  37. Time is of the essence for the performance of all of the Purchaser's obligations under this Agreement.  
  38. Attorney Fees
  39. In the event of a default by the Purchaser, the Purchaser will pay all the Seller's reasonable and actual attorney fees associated with enforcing the Seller's rights under this Agreement.  The default will not be deemed to be corrected until all attorney fees have been paid.  
  40. Entire Agreement
  41. This Agreement will constitute the entire agreement between the Purchaser and the Seller.  Any prior understanding or representation of any kind preceding the date of this Agreement will not be binding on either party except to the extent that it is incorporated into this Agreement.  
  42. Amendments
  43. Any amendments or modifications of this Agreement or additional obligations assumed by either party in connection with this Agreement will only be binding if they are evidenced in writing and signed by each party or an authorized representative of each party.  
  44. Waivers
  45. A waiver of any rights by any party in connection with this Agreement will only be binding if evidenced in writing and signed by each party or an authorized representative of each party.  
  46. Severability
  47. If there is a conflict between any provision of this Agreement and the applicable legislation of the Commonwealth of Virginia (the "Act"), the Act will prevail and such provisions of this Agreement will be amended or deleted as necessary in order to comply with the Act.  Further, any provisions that are required by the Act are incorporated into this Agreement.  
  48. In the event that any of the provisions of this Agreement will be held to be invalid or unenforceable in whole or in part, those provisions, to the extent enforceable and all other provisions of this Agreement will nevertheless continue to be valid and enforceable as though the invalid or unenforceable parts had not been included in this Agreement and the remaining provisions had been executed by both parties subsequent to the expungement of the invalid provision.  
  49. Interpretation
  50. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement.  Words in the singular mean and include the plural and vice versa.  Words in the masculine mean and include the feminine and vice versa.  
  51. Joint and Several Liability
  52. All Sellers are jointly and severally liable for the acts, omissions, and liabilities of all other Sellers to this Agreement.  
  53. Heirs and Assigns
  54. This Agreement will extend to and be binding upon and inure to the benefit of the respective heirs, executors, administrators, successors, and assigns, as the case may be, of each party to this Agreement. All covenants are to be construed as conditions of this Agreement.



IN WITNESS WHEREOF the Seller and Purchaser have duly affixed their signatures under hand and seal on this 21st day of December, 2014.

 

 

 
 

 

__________________________________

 

 

_________________________ (Seller)

 

 

 
 

 

__________________________________

 

 

_________________________ (Purchaser)


SELLER ACKNOWLEDGMENT

COMMONWEALTH OF VIRGINIA
COUNTY OF __________________

The foregoing instrument was acknowledged before me this 21st day of December, 2014, by _________________________.

________________________________
Notary Public

My commission expires: _____________




PURCHASER  ACKNOWLEDGMENT

COMMONWEALTH OF VIRGINIA
COUNTY OF __________________

The foregoing instrument was acknowledged before me this 21st day of December, 2014, by _________________________.

________________________________
Notary Public

My commission expires: _____________


DISCLOSURE REQUIREMENTS

We recommend that you provide the Purchaser with an Amortization Schedule detailing the payments to be made for the duration of this Agreement.

If the house you are selling was built prior to 1978, the Seller is required to deliver a lead paint disclosure to the Purchaser. If this applies to your sale, please visit http://www.hud.gov/offices/lead/enforcement/disclosure.cfm and print off the lead paint pamphlet and disclosure form.

If you have any questions or concerns regarding what needs to be disclosed, please contact a local attorney.  

Drafted by:  of

 

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Contract for Deed Information

Alternate Names:

A Contract for Deed is also known as:

  • Land Contract

What is a Contract for Deed?

A Contract for Deed (or Land Contract) is a contract for the purchase of real property (real estate) in which the seller retains the deed (title) to the property until the purchaser makes payments in installments equal to the agreed upon purchase price. The purchaser has an immediate right to possession of the property, but the seller defers delivery of the deed (transfer of title) until he or she has secured all or part of the purchase price.

The land contract is generally used when a buyer is unable to obtain financing through traditional methods and instead makes monthly payments to the seller.

What is in a Contract for Deed?

A Contract for Deed includes information about the seller and buyer, the property, the price, and the payment plan.

It also encompasses more detailed information about the property insurance, property tax, loan interest calculation, late payment penalties and default protocols.

When You Should Use a Contract for Deed

If you are transacting a real estate purchase where the seller is providing financing, you should use a Contract for Deed. Generally, the purchaser will be repaying the loan to the seller through monthly installments.

A Contract for Deed is commonly used when a buyer is unable to obtain financing from a traditional lender due to poor credit rating, insufficient collateral or down payment, changed employment situation, sporadic employment history, or a high personal debt to income ratio.

How do I Determine Payments?

The monthly payment required on a Contract for Deed is usually similar to that of a mortgage payment, meaning that a portion of the installment will go towards the repayment of the principal, and the other portion will go towards the repayment of the interest owed.

One way to determine a fair interest rate and to calculate the payments is to contact local financial institutions or mortgage brokers to find out current industry standard rate that are charged by lenders.

Purchaser's Default on a Land Contract

A purchase default is what ensures that the buyer will not violate the terms of the contract. General purchase defaults can include:

  • If the purchaser is late in making a payment, the purchaser has a notice period to remedy the default. During this period, he or she will be subject to a late fee, the amount of which is decided in the agreement.

  • When the purchaser fails to remedy a default, he or she will only have a limited time to pay off the remaining balance of the purchase price. He or she will also be required to vacate the property within the timeframe agreed upon in the contract.

  • The seller has a right to reinstate this agreement if the purchaser can cure the defaults that have occurred. However, this right is at the sole discretion of the seller. Because of this, it is important the parties agree to feasible repayment terms so the purchaser will be less likely to default under this agreement.

Responsibilities in a Contract for Deed

In a Contract for Deed, both the seller and the buyer have responsibilities when it comes to the property. Unlike a lender financed mortgage, the seller retains the property deed until the purchase price has been paid in full.

Because of this, each party has different obligations in terms of insurance and property tax.

Insurance

In most cases, the seller will be responsible for insurance on all of his or her personal items that remain on the property prior to the buyer receiving the deed.

The purchaser will be responsible for insurance for his or her personal items, the property itself, as well as liability insurance.

Property Tax

Usually, the purchaser takes over property tax payments from the seller.

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