Ask this before you ask about the price, the rate or the monthly payment. Everything else is negotiable. This is structural.
Structure one: deed at closing
You receive the deed when the deal closes. The land is yours, recorded in your name at the county, from that day forward. The seller protects their position by holding a promissory note — your written promise to pay — secured by a mortgage or deed of trust recorded against the property.
This is how a bank does it. When you buy a house with a mortgage, you own the house on closing day. The bank does not hold your deed in a drawer for thirty years; it holds a recorded lien.
What this means in practice:
- You are the owner of record. The county says so. Anyone who searches the title sees your name.
- You build equity that is legally yours. If you default, the seller must foreclose, and foreclosure is a court-supervised process that generally returns surplus proceeds to you after the debt is satisfied.
- You can usually build, improve or use the land subject to zoning, because you own it.
- You can refinance. A bank can lend against property you hold title to. It cannot lend against a promise.
- The seller's problems are not automatically yours. Their creditors cannot reach land that is no longer theirs.
Structure two: contract for deed
Also called a land contract, an installment contract, a bond for deed or an agreement for deed, depending on the state. The seller keeps legal title. You get equitable title — a right to receive the deed once you have paid in full. Until that day, the owner of record is the seller.
This is the instrument the CFPB studied, and the findings are the reason this page exists. Its 2024 report describes contracts that allow eviction and forfeiture over a single missed payment or a lapsed insurance policy, with the seller keeping all payments made and any improvements the buyer built. An advocate quoted in the report put it simply: "Title problems are extremely common in land contract transactions."
What this means in practice:
- You are not the owner of record. A title search shows the seller.
- Your equity may not survive a default. In forfeiture states, missing payments can mean losing the land and everything you have paid toward it.
- Building may be prohibited until payoff. Several sellers in this market state this outright, and permits often require the land to be in your name.
- You cannot refinance out. No lender will take a first position on property their borrower does not own.
- The seller's creditors may be able to reach the land, because on paper it is still the seller's asset.
Is a contract for deed always bad?
No, and it is worth being accurate about this. A contract for deed is a legitimate instrument with legitimate uses. It lowers the seller's risk, which is why it often comes with a very small down payment — sometimes a few hundred dollars on a parcel worth twenty thousand. For a buyer who genuinely cannot assemble a real down payment, it can be the only door open.
The problem is not the instrument. The problem is that it is frequently sold to people who believe they are buying the first structure. If you are knowingly accepting a contract for deed in exchange for a $300 entry point, that is a decision you are entitled to make. If you believed you were getting a deed and discover in year four that you were not, you have been dealt with badly.
How to find out which one you have
Do not rely on how the seller describes it. Documents, not adjectives.
- Ask directly, in writing: "On the day I close, will a deed be recorded in my name at the county?" Keep the reply.
- Read the document title. "Contract for Deed," "Land Contract," "Agreement for Deed" and "Installment Land Contract" all mean the seller keeps title.
- Look for a promissory note and a deed of trust or mortgage. Those two documents together mean the first structure.
- Check the county recorder after closing. Search the parcel number. If the grantee is not you, you do not own it.
- Ask when the deed transfers. "At closing" and "when the loan is paid in full" are entirely different transactions.
The threshold question nobody asks
If a seller offers both structures depending on the size of your down payment, ask where the line sits and what changes on each side of it. A seller who has thought this through will have a clear answer. A seller who has not will become vague, and the vagueness is the information.
General information, not legal advice. Have a real-property attorney in the state where the land sits read any contract before you sign it.