A retired couple owns their home outright and decides to sell to a young buyer who has steady income but no bank financing. The parties sign and record an agreement under which the buyer takes possession, pays the couple monthly for fifteen years, and obtains a recordable warranty deed only when the final payment clears. While the buyer makes payments and lives in the home, the formal record ownership remains in the couple's name as security against default. Which instrument did the parties use to structure this sale?
Correct Answer
C) Land contract (contract for deed)
The couple keeps record ownership as their security while the buyer pays monthly over fifteen years and only receives a deed at the end. That installment-style sale where the seller keeps formal record ownership during payments is a land contract (also called a contract for deed).
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Related Topics & Key Terms
Key Terms:
Related Concepts
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
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