Contract for Deed (Guest Post)

Contract for Deed - Woods Fuller Schultz & Smith LogoGuest Post from Vincent Jones, Woods Fuller Schultz & Smith P.C.

There are times when property owners want to sell a property, but can’t find an interested, qualified buyer.  When a buyer appears who cannot obtain immediate financing, property owners are sometimes tempted to enter into alternative sale arrangements.  One possible alternative is a contract for deed.  These types of contracts can be a good idea in some circumstances, but Sellers need to understand the risks.

A contract for deed is an installment contract, where a seller agrees to transfer title to property upon payment of all payment installments by the purchaser.  It creates an interest in real property belonging to the purchaser.

When a contract for deed is breached by the purchaser, the owner must foreclose on the contract for deed in order to terminate the contract and evict the purchaser.  Unfortunately, evicting a contract for deed purchaser is more difficult that evicting a tenant.  The forcible entry and detainer (eviction) statutes located in SDCL Chapter 21-6 are not sufficient to foreclose on a contract for deed.  If it is necessary to foreclose on a contract for deed, the relevant statutes allow a defendant 30 days to answer the Summons and Complaint.  It will take longer to evict a purchaser under a contract for deed than it would to evict a tenant with a simple lease.

Other important issues to consider are the fact that a breaching contract for deed purchaser may argue for the return of payments made towards the contract for deed, and will continue to have an interest in the property until the contract for deed is terminated.  There is a danger that liens against the contract for deed purchaser may attach to the property, and a costly lawsuit may be required to quiet title to the property.

If you are considering entering into a contract for deed, seek a qualified attorney to advise you on the specific facts of your situation.

NOTICE:  This article is intended to provide only general information.  It does not represent a legal opinion or advice regarding any particular case or issue.  Transmission of the information is not intended to create, and receipt of the information does not constitute, an attorney-client relationship.  For legal advice on a specific matter, please seek counsel.