What is an Agreement for Deed and is it considered a mortgage?
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Florida Agreement for Deed Law: The Same as a Mortgage?

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What Is an Agreement for Deed?

You may be wondering, what exactly is an agreement for deed?
An agreement for deed is often referred to as “land contract.” This arrangement is where a seller provides owner financing to a buyer.
 
In turn, this allows a buyer to make monthly payments to the seller (instead of a bank).
 
The seller will transfer the property title once receiving a certain amount of money.

Is an Agreement for Deed a Mortgage?

Yes, it is! Florida Statute 697.01 defines a mortgage as:
 
“all conveyances…writing or conveying selling property….for the purpose or with the intention of securing the payment of money….shall be deemed and held mortgages.”
 
Since an agreement for deed is an agreement that the seller makes to the buyer to transfer the property once a specified amount of money has been received, it is considered a mortgage under Florida Law.
 
Are there other names for an agreement for deed?
 
The following phrases will often refer to as an agreement for deed:
 
  • Contract for Deed
 
  • Owner Financing
 
  • Seller Financing
 
  • Installment Sale Agreements
 
  • Agreement for Deed
 
 

Legal Consequences for an Agreement for Deed?

For Buyers:
 
This means that a buyer can take possession of the property. A buyer may move onto the property, live on the property, and use the property as if they owned (i.e. – rent it out to a third party).
 
For Sellers:
 
This means that a seller retains the actual title to the property.
Once the seller receives a certain amount of money, the seller will transfer the property title.
 
Then the seller will not be able to occupy the property and will nor have legal title to the property.
 
If the buyer defaults on payments, then the seller may cancel the contract. This means the seller can resume physical possession of the property.
 

Should you buy a property via agreement for deed?

There are many pros and cons:
Pros:
 
Negotiable Terms:
A lending institution or bank requirements are quite fixed and strict. The terms are not negotiable such as in an instance like an agreement for deed.
 
Under an agreement for deed, all the terms, if permitted under law are negotiable. This provides flexibility to change terms depending on the circumstances.
 
No Lending Company:
An agreement for deed can save a tremendous amount of time. Since a bank doesn’t have to qualify a buyer, an eager seller can sell a property much faster.
 
This can also allow the buyer to provide less of a down payment on the property. A bank will generally call for 20% down on a residential home.
 
Through an agreement for deed, the requirements are all negotiable. In some instances, a buyer will place 0% down.
 
Speedier Transaction:
There is no other party involved. It’s the seller and the purchaser involved in the sale of the property.
 
This allows for a much faster transaction. This method can be definitely useful if a limited time frame exists.
 
Cons:
 
Failure to Record:
Many parties forget to fail to record an agreement. It is actually a required under Florida Law.
 
A seller can sell a property if a buyer fails to record the agreement. This means the title of the property will transfer to another person.
 
Other negative implications exist as well.
 
Higher Interest Rates:
Sellers often expect higher interest rates when entering into an agreement for deed. These interests rates may be lower in the beginning and overtime raise.

Consult an Experienced Real Estate Attorney

Our firm has been helping purchasers and sellers for over thirty years. We can help tailor your deal to meet your needs. Call today for a Free Consultation about a potential agreement for deed!
 
We encourage you to seek the advice of an experienced real estate attorney to avoid any problems. Our team can help you avoid future legal problems. Call us today at 772-589-5500
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