By: Thomas D. Jenks | Ansbacher Law
A contract for deed, also known as an agreement for deed, land contract, or installment contract, may appear to be an attractive option for buyers and sellers of real property. From a buyer’s perspective, a contract for deed avoids the need to obtain third-party financing and helps minimize closing costs. From a seller’s perspective, a contract deed may be attractive because there is no financing contingency or lender underwriting requirements and the seller retains legal title to the property pending payment in full of the principal and interest. However, there are serious pitfalls sellers should be aware of when using an agreement for deed.
While the seller continues to hold legal title to the property, many sellers are surprised to learn they cannot simply evict a buyer in the event of default. Agreements for deeds give the buyer an equitable interest in the property and are treated as mortgages under Florida law. As such, a seller must initiate mortgage foreclosure proceedings to remove the buyer’s interest in the property. Summary eviction proceedings are not available. The State of Florida considers an agreement of deed to be a transfer of interest in real property and levies a documentary transfer tax on the agreement as if the seller actually conveyed legal title.
Given these issues, we typically recommend alternatives to an agreement for deed when sellers are contemplating assisting with financing a buyer’s purchase.
THOMAS D. JENKS is an attorney at Ansbacher Law. Mr. Jenks focuses his practice on residential and commercial real estate law transactions, as well as business acquisitions and transactions. He received his bachelor’s at University of Florida and his Juris Doctorate from The University of Oregon School of Law. Mr. Jenks began his career in West Palm Beach serving as in-house legal counsel to a South Florida behavioral health facility, where much of his focus was on commercial real estate transactions.