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What is a Bond for Deed?

Mary McMahon
Updated May 16, 2024
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A bond for deed is a type of real estate sale where a buyer makes a series of payments to the seller, and when the payments are completed, the seller transfers the deed to the property. This procedure is also sometimes known as a contract for deed, and it is not available in all areas. People exploring methods of real estate financing can discuss a bond for deed with an attorney or real estate agent to see if it is an option and to discuss whether it is a good financing choice.

This approach to real estate transactions is most common when there are problems making it difficult to get a conventional loan on the property. The buyer may not qualify for a loan, for various reasons, but can still provide a down payment and make periodic payments. The property itself may be difficult to finance, as many banks will decline to lend on properties in poor condition. In the bond for deed, people can structure the arrangement in a number of ways, but it boils down to allowing the seller to retain the title to the property until it is paid for.

This differs from other real estate transactions, where the title is transferred to the buyer with a lien, allowing the seller or a mortgage company to repossess it if the buyer does not meet the contract obligations. People considering a bond for deed can be at risk, as usually the terms of repossession are much less forgiving. Missing payments can have serious consequences when people don't hold the title to the property, and the conditions of the contract should be carefully reviewed.

In some cases, the sale is arranged to allow the buyer to make periodic payments for a short period, and then the buyer is expected to seek financing to pay off the remainder of the loan so the seller can collect the funds. In this type of bond for deed, if the buyer cannot get financing when the time comes, the property will be forfeit and the buyer will have to leave. Any funds paid on the property will be considered the property of the seller, including the down payment made.

If a bond for deed is an option legally, sellers may still reject an offer for a bond for deed transaction. For sellers, there are some risks to this type of financing. They do not collect the funds immediately, a potential problem for people trying to sell property and use the proceeds to relocate. They also have to administer the payments, something not everyone is willing to do, and if a problem occurs, they will have to expend money on hiring attorneys and compensating sheriffs for assisting with the repossession.

MyLawQuestions is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a MyLawQuestions researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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