A bond for deed is a type of contract for the sale of real property. In a bond for deed, the purchase price is paid buyer in set installments, rather than paying the entire purchase price for the property at closing.
Once the buyer completes the agreed-upon payments, the seller will then deliver the deed to the buyer. In some cases, the buyer’s name can be placed on the title well before they are done with the payments.
Many property sales arrangements involve a bond for deed, since most buyers don’t have the funds to cover the entire purchase price. A bond for deed is also called a “land contract”, or alternatively, a “contract for deed”. Bonds for deeds can often involve a mortgage agreement; in some cases, the seller may finance the buyer themselves.
As mentioned, a deed for bond is generally reasonable, as the average person would usually prefer to pay in installments over time rather than one lump sum. In addition, a bond for deed allows the seller and purchaser to specify different terms of the payment process, include:
- Overall total purchase price
- Interest rates
- Methods of payments
- Legal remedies in the event of a breach of contract
In addition, any provisions regarding insurance and tax rates can be tailored according to the needs of the seller and buyer when they undergo negotiations. Due to the various terms that need to be agreed upon, the involvement of a lawyer is usually necessary during the negotiation and drafting stages.
Bonds for deed transactions can sometimes be associated with specific types of legal disputes. Like any contract, the agreement can be subject to various violations and disputes, including:
- Failure of the seller to transfer the deed after the payments have been completed
- Failure of the buyer to make payments (in which case the buyer may forfeit their right to the deed)
- Violations of warranty obligations associated with the deed (such as the guarantee that the seller is the legal owner of the property)
Many legal disputes over a bond for deed arise because the contract agreement was unclear or poorly written. This can happen for example if the parties attempt to complete the paperwork by themselves, or if they fail to secure professional guidance during the process. A clearly written bond agreement is key to preventing various legal disputes and lawsuits in the future.
Utilizing a bond for deed can be advantageous for both parties in a real estate sales transaction. However, in order to prevent legal disputes or violations, it may be necessary to hire a lawyer for help with the documents. A qualified real estate attorney will be able to help with the drafting and creation of the agreement, as well as the negotiation of the different terms. Also, in the event that you need to file a lawsuit, your attorney can represent you during the court hearings.