termscontract

Terms contract, also called a contract for deed or land contract, is a real estate financing arrangement in which a seller agrees to transfer ownership to a buyer only after the buyer completes a series of installment payments. Until payment is complete, the seller typically retains legal title or holds a security interest, while the buyer may take possession and acquire equitable title.

Under a terms contract, the buyer makes regular payments that cover principal and interest, and often taxes and insurance. Upon fulfillment of the payment schedule, the seller conveys title to the buyer by deed. If the buyer defaults, the contract may be terminated and the seller may reclaim the property, with enforcement depending on state law. This structure creates different risk dynamics than a traditional mortgage: the buyer often has less secure or formalized ownership until the final payment, while the seller bears risk if the buyer stops paying or if property conditions change.

Regulation of terms contracts varies by jurisdiction. Some states require disclosures or protections for buyers, or impose limits on certain terms, while others permit terms contracts with fewer formalities. They are commonly used when buyers have limited access to conventional financing, but they can present greater risk for buyers—such as potential forfeiture—than traditional lending arrangements.

Synonyms and related instruments include contract for deed, land contract, or installment sale; the arrangement is a form of seller financing and is governed by state statutes and case law that regulate property transfers.