Owner financing is a good instrument. We use it, and for a buyer who cannot get a bank to look at raw land, it is often the only realistic path to ownership. But it is an instrument with a bad history, and the history is worth knowing before you sign anything — with us or with anyone else.
In August 2024 the Consumer Financial Protection Bureau published its findings on contracts for deed. The numbers are not ambiguous. More than half of these contracts end with the buyer losing the property. In Texas border colonias, 45% of borrowers defaulted over a 21-year period and fewer than 20% ever received a deed. One Pennsylvania seller saw 79% of its contracts fail within a few years. The CFPB found that title searches are frequently not performed, contracts often go unrecorded, and many allow the seller to evict and keep every payment made over a single missed instalment — where a mortgage generally requires 120 days of delinquency before foreclosure can even begin.
That is the floor of this industry. Everything below is how you tell whether a particular deal sits on that floor or well above it.
The ten questions
- Who holds the deed while I am paying? This is the first question and the most important one. If the seller keeps title until the final payment, you are not an owner. You are a buyer with a promise. What the two structures actually mean →
- Is my interest recorded at the county? An unrecorded contract is invisible to the world. The seller can borrow against the land, sell it to someone else, or have it taken by their own creditors, and you have no public claim. How recording protects you, and how to check →
- What happens if the seller fails? Sellers have mortgages, creditors, illnesses and heirs. A deal that only works while the seller is solvent and alive is not a deal. The four ways a seller can take you down with them →
- If I miss a payment, do I lose everything? Forfeiture means the seller keeps the land and every dollar you have paid. Foreclosure means your equity is protected. The difference can be tens of thousands of dollars. Forfeiture versus foreclosure →
- How long is my cure period? If something goes wrong in your life, how many days do you have to fix it before the seller can act? What a cure period is and what is reasonable →
- Can I pay it off early without a penalty? Some contracts charge you for paying ahead of schedule. How to find out before you sign →
- Can I refinance out of this later? Owner financing is a bridge, not a destination. A bank cannot refinance a loan secured by property you do not hold title to. What a lender will need from you →
- Is my down payment refundable, and what is the document fee? Several large sellers in this market charge a non-refundable deposit of several hundred dollars before you can see the county records. What you are actually agreeing to →
- Is there a balloon payment? A low monthly payment with a large lump sum at the end is a common structure, and buyers routinely miss it in the paperwork. Ask for the payoff schedule in writing and look at the final line.
- What is the interest rate? Almost nobody in this industry publishes one. Buyers are asked to commit on the strength of a monthly payment with no visible rate behind it. The CFPB documented contract-for-deed rates averaging 9.9% nationally and 12–14% in Texas. If a seller will not state a rate, that is the answer.
Why we publish this
It would be commercially easier not to. Writing down the ways owner financing goes wrong invites you to ask us harder questions, and it hands our competitors a reading list.
We publish it because our business model is the second purchase and the referral, not the exit. A buyer who understood the instrument and got what they expected tells other people. A buyer who found out in year three that the deed was never coming does too, and that is the reputation this whole industry carries.
The honest version of this subject happens to be our sales argument. That is a fortunate position, but it is not the reason the page exists.
The one thing to do before you sign anything
Take the contract to a real-property attorney in the state where the land sits. Not a general practitioner, not a title company representative who works for the seller — a lawyer whose client is you. In most states this costs a few hundred dollars against a purchase of many thousands, and it is the single highest-return expenditure in the entire transaction.
Any seller who discourages that, who creates urgency around it, or who tells you it is unnecessary has told you something important about the contract.
This page is general information about how these instruments work. It is not legal advice, and the law varies significantly by state.
Keep reading
- Who holds the deed while you are paying
- Whether your contract is recorded, and why it matters
- What happens if the seller defaults
- Forfeiture versus foreclosure
- Cure periods, and what is reasonable
- Prepayment penalties
- Refinancing out of owner financing
- Whether your down payment is refundable
- The full list of questions to ask a seller