An installment contract, also known as a contract for deed or land contract, is an official agreement between a real estate buyer and seller where the buyer pays the full purchase price plus interests in installments over a set period of time directly to the seller. The buyer takes possession of the property, but the seller retains the title. Once the purchase is completed, the seller transfers the title to the buyer.

Because installment contracts are a form of security for both parties, it’s best to have an experienced real estate attorney review the contract before it is signed to ensure that it’s presented fairly. The team at Goosmann Rose Colvard & Cramer, P.A. has years of experience providing legal services in a number of real estate deals. Request a free, no-obligation consultation today!

Benefits For Sellers

While an installment contract seems to mainly benefit buyers, there are some potential advantages for sellers as well. This is especially true if the property has been on the market for a while. Being open to offers from buyers who may not qualify for a mortgage can provide access to additional buyers. The deal can also be completed in a shorter period of time when compared to waiting on a mortgage to go through. Additionally, there’s no requirement for an appraisal and the seller can make a profit on the interest over time.

Risks For Sellers

The property will remain in the seller’s name for however long it takes the buyer to pay it off. And, if they default, the seller will still be stuck with the property without receiving the full payment. If the seller originally purchased the land through a loan, that loan stays on their credit, and they are still responsible for paying it off. There’s also the possibility the buyer might violate codes or ordinance requirements. In that event, the seller could face fines or legal ramifications.

Benefits For Buyers

If you don’t qualify for a mortgage through a third party, an installment contract can give you the opportunity to purchase real estate. A contract for deed can provide the opportunity to negotiate the down payment amount and the buyer can avoid fees like closing costs while potentially scoring a better interest rate. And, unless there’s a specific clause in the contract, the buyer won’t have to pay the remaining balance if they have to default.

Risks For Buyers

Because the buyer doesn’t own the property, they won’t have any legal claim to it until it’s paid off. Also, unlike a traditional mortgage, if the buyer defaults, they might only have 30–60 days to rectify the default. Otherwise, the buyer will lose all of the money already invested in the property, including any maintenance and upgrades. They’ll also be faced with limited disclosure and inspection rules, so there is the risk of purchasing a home with unknown faults.

How An Asheville Real Estate Attorney Can Help

Having an experienced real estate lawyer on your team can be beneficial when taking out an installment contract. Your attorney can assist with drafting or reviewing the contract, and can also help during negotiations to make sure all details are accounted for. Additionally, if there ends up being a lawsuit over a dispute, your attorney will already be familiar with the contract and can represent your interests in court. 

Though the process might seem straightforward, the language of the contract should be reviewed by a professional. Whether you’re a seller or a buyer, the team at Goosmann Rose Colvard & Cramer, P.A., uses its years of real estate experience to help make the process easier while protecting your interests.