National Real Estate Exam (PSI)ContractsMedium
A buyer agrees to purchase a home by making monthly payments directly to the seller over 15 years, with the seller retaining legal title until the final payment is made. What type of arrangement is this?
- APurchase money mortgage
- BDeed of trust
- CContract for deed
- DLease-option agreement
Show answer & explanationAnswer & explanation
Correct answer: C. Contract for deed
A contract for deed (also called an installment land contract) allows a buyer to make payments directly to the seller while the seller retains legal title until the contract terms are fully satisfied.
Why the other options are wrong
- A. A purchase money mortgage is seller financing where the buyer receives title immediately, unlike here.
- B. A deed of trust involves a trustee holding title for a lender, typically used with third-party financing.
- D. A lease-option involves renting with an option to buy, not direct installment ownership transfer.
Contract for Deed
A seller-financing arrangement in which the buyer makes installment payments directly to the seller, who retains legal title until the contract is fully paid.
- Also called an installment land contract
- Buyer holds equitable title during payments
- Buyer receives legal title only after final payment
Memory trick: Deed stays with seller till the last dollar's paid.