A contract for deed is an agreement where a buyer moves into a property and begins making payments to the seller prior to obtaining ownership to the home. Lease-to-own, lease with a purchase option, and contract for deed are all similar agreements and these terms are often used interchangeably to refer to these similar type agreements. The process of removing the buyer from the property as the result of non-payment is referred to as a contract for deed foreclosure.
CONTRACT FOR DEED FORECLOSURE?
These type agreements are often used when the buyer is unable to obtain traditional financing through a bank or mortgage company. In some instances, the buyer may be removed through a simple eviction action; however, in many instances, an equitable foreclosure is required to remove the buyer. Although the term “foreclosure” is used, the process is not the same as a standard mortgage foreclosure action. In a mortgage foreclosure action, the property is sold by the sheriff through a public auction. In contrast, a contract for deed foreclosure is an equitable foreclosure. In other words, instead of selling the property through a public sale, the judge will usually set a period of time after the judgment is entered that the buyer can remain in the home and have the opportunity to gain ownership of the home by paying the entire amount owed under the contract for deed.
The primary factor for determining if a buyer can be removed through an eviction as opposed to a contract for deed foreclosure is the amount of money the buyer has paid under the contract for deed. If the buyer has paid a large down payment or has made the majority of the payments under a contract for deed, a foreclosure will be required. If the buyer did not make a down payment and has only made a few small payments, the court may allow the buyer to be removed through an eviction action.