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Contracts for Deed: Missouri Real Estate Conveyances, Seller Financing

The conventional way real estate financing occurs is when the purchaser applies for a mortgage with a bank/financial institution. The bank/financial institution approves the transaction and wires the money to the title company, who in turn tenders the money to the seller. The purchaser will then execute a promissory note promising to pay back the loaned money at a set interest rate, with the maturity date usually being 15 or 30 years in the future. The debt arising under the promissory note is then secured by the deed of trust. Once the mortgage is paid off, the financial institute will file a deed of release clearing their claim to the property.

Contracts for deed are similar, but essentially eliminate the third-party lender, rendering the transaction a seller-financed arrangement. In short, the seller enters into a contract with the purchaser where the purchaser will make payments to the seller at set intervals, and possibly with interest. The purchaser, however, does not take title to the property until the contract is fully paid (and thus will not have equity in the property until that time). With the conventional approach described above, the purchaser takes title to the property at the time of closing .

Contracts for deed can be especially messy because they are usually done quickly and implemented in circumstances where the purchaser cannot qualify for a conventional loan. And because the transaction is a contract, the usual principles relating to contract remedies, interpretation, and construction apply.

Contact us with questions pertaining to real estate contracts, contracts for deed, breach of contract actions, and business questions generally.