Contract for Deed

A way to buy property where the seller finances the purchase directly instead of the buyer getting a bank mortgage. The seller keeps the deed until the buyer finishes paying.

A contract for deed is a real estate transaction where the seller acts as the lender. Instead of getting a mortgage from a bank, the buyer makes monthly payments directly to the seller over time. The seller keeps legal title (the deed) to the property until the buyer finishes paying the full purchase price. Once all payments are made, the seller transfers the deed to the buyer.

Contracts for deed can be attractive to buyers who cannot qualify for a traditional mortgage. However, they can also be risky. If the buyer misses payments, the seller can cancel the contract under Minn. Stat. section 559.21, and the buyer may lose all the money they have paid and the property itself.

Minnesota has specific protections for contract for deed buyers, including required notice periods before cancellation and the buyer’s right to cure (catch up on payments) within a certain time frame.

Why it matters: If you are considering buying property through a contract for deed, understand the risks. You may have fewer protections than a traditional mortgage borrower. Have a lawyer review the contract before you sign, and make sure you understand the cancellation process and your rights if you fall behind on payments.

Example: A buyer agrees to purchase a house for $150,000 through a contract for deed, paying $1,200 per month for 15 years. After five years and $72,000 in payments, the buyer loses their job and falls behind. The seller sends a cancellation notice. The buyer has 60 days to catch up on payments or risk losing the house and all payments made.