Asked in MortgagesHome Equity and RefinancingDeeds and Ownership
How binding is a contract for deed if purchaser quits paying?
February 27, 2009 3:36AM
A contract for deed is a binding contract, and the borrower is obligated to make their payments. However, a few states have come to the conclusion that contracts for deed are a form of predatory lending (since a person can have been making their payments for 20 years, miss one payment, and then lose their house, regardless of the equity they've built up), and their validity has been questioned. The reason lenders like contracts for deeds is because it is much easier to take the property back if the borrower defaults - it's faster than a foreclosure and is not always a judicial process. It usually only requires giving notice that the terms of the contract for deed have been violated, and then the borrower can be evicted.