A contract for deed is a written, signed contract in which a seller agrees to sell and a buyer agrees to buy land and/or buildings on land, as described in the contract. The buyer obtains legal interest in the property after making all the required payments to the seller, which can often culminate in a large “balloon” payment on the back-end.To be legally enforceable, a contract for deed should contain the following:

1. Identification of the parties and their representatives, if any.

2. A legal description of the land.

3. The total purchase price.

4. The amount of down payment, if any.

5. The balance remaining after down payment.

6. The amount of each installment payment.

7. The date installment payments are due.

8. The amount of interest (in some states limited by statute)

9. The date the interest and payments begin.

10. The length of the contract term.

11. The method of payment of taxes and/or insurance. (See below)

12. Remedies available incase a party fails to do what he/she agreed to.

In a contract for deed, generally the seller is responsible for paying taxes and insurance payments during the term of the contract. Alternatively, by mutual agreement, the seller can pay the taxes and insurance premiums using escrow payments made by the buyer. If the parties want to establish an escrow account, the agreement should specify:

• Whether the escrow will cover taxes, special assessments, hazard insurance or all three.

• The amount of each escrow payment.

• The due date of each escrow payment.

• The method for adjusting the escrow payment if the amount of taxes and/or insurance premiums change.

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