Contract for Deed

What is Contract for Deed?

• A contract for deed is an alternative financing agreement in which the seller finances the sale of the property rather than a lender.
• It’s most common to see contract for deeds in situations where one family member purchased the property from another, the parties both knew each other, or the party buying the property couldn’t get financing from a bank.

How does it relate to family law?

During a divorce a contract for deed could apply in a few ways:

1. Clients have purchased a property via contract for deed AND it’s still under the contract
2. Clients have sold a property via contract for deed AND it’s still under the contract (the term commonly used here is “A vendor’s interest in the real property” )
3. If the clients have purchased a property via contract for deed AND the contract has been fulfilled (paid in full)
   1. In this case, the client should have the actual deed for the property, they would own the property outright, and it can be treated just like any other real estate.
4. If the clients have sold a property via contract for AND the contract has been fulfilled (paid in full)
5. In this case, the clients should have already signed off on the final deed to the new owners and the clients no longer have any right or title to this home, and it should be treated just like any other property that sold.

What needs to happen if the contract is still in effect (not paid in full?)

If the contract is still in effect, someone has to be assigned or awarded the contract.

• If the clients are purchasing the property via contract for deed, then the party keeping the property will be assigned the contract for deed so only they are considered responsible for the payments/contract (just like with a mortgage).
• If the clients are selling the property to someone else via contract for deed, then one party will have to be assigned the contract for deed and essentially continue to monitor the contract, make sure it’s paid, etc. until it’s paid in full.

Key Takeaway  – The attorney needs to figure it out

This is only a brief summary of contract for deed and does not include all possible scenarios or outcomes. The attorney should ensure they know the exact situation, what our client wants, and review all relevant statutes/laws to determine how to handle contract for deed cases, what language should be used, and what documents should be drafted. 

Sample Language

When clients are the sellers and you are listing the property in the pleadings or the FOF in an MTA:

“Petitioner and Respondent have a vendor’s interest via contract for deed in the real property located at 12 West Main Street, Mankato, MN 56001 (PID 05.222.0101) and legally described as:”

When clients are the sellers and you are listing the property in COL in an MTA:

“Husband shall be awarded all right and title to the vendor’s interest in 12 West Main Street, Mankato, MN 56001”

Real Estate Documents

A QCD along with an assignment of Contract for Deed should be drafted.

Examples (in this situation the clients had sold a property via contract for deed and it was still under the contract. Husband was assigned/awarded the contract):

2024-10-08 OPA Proposed Assignment of Contract for Deed Quit Claim Deed

2024-10-08 OPA Proposed Quit Claim Deed -Baker (For Deb’s signature)