Land Contract
A land contract (contract for deed) is seller financing where ownership transfers after full payment. Explore benefits and risks of land contracts.
Definition
A land contract, also known as a contract for deed or installment sale agreement, is a form of seller financing in which the buyer agrees to pay the seller the purchase price over time, often with interest. The buyer takes possession of the property and pays in installments, but the seller retains legal title until the full purchase price is paid. Land contracts can enable buyers with limited credit or down payment to purchase property, but they carry risks: buyers may have less legal protection than with traditional mortgages, and default can result in loss of equity. Both parties should consult legal counsel to draft fair, enforceable terms.
Why It Matters
You get possession and the tax bill, but the seller keeps legal title until the final payment clears. Fall far enough behind and Washington's forfeiture process under RCW 61.30 can end your interest in roughly 90 days, taking every dollar you already paid with it. There is no foreclosure auction and no surplus check, which is a large part of why sellers offer these deals.
Examples
Forty thousand dollars down on a $310,000 rural parcel, 42 monthly payments made, then a job loss. The seller records a declaration of forfeiture and the buyer walks away with nothing after paying in $118,000.
Six years into a contract for deed, a buyer applies to refinance and learns the seller drew a $90,000 equity line against the property in year three. That lender's lien sits ahead of the buyer's interest.
A seller in Spokane County dies before payoff. The heirs contest the arrangement, and the buyer spends eight months and $14,000 in legal fees before title is finally conveyed.
Tips
Record the contract, or a memorandum of it, with the county auditor the same week you sign. An unrecorded contract makes you invisible to any future lender or buyer dealing with the seller.
Route payments through a licensed escrow or collection agent that holds a signed, notarized deed for delivery at payoff. Paying a seller directly leaves you suing for specific performance if they later refuse to sign.
Read a title report before the first payment and look for an existing mortgage. A due-on-sale clause on that underlying loan lets the seller's bank call the full balance once your contract hits the record.
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