So what is a Contract for Deed? It is a type of seller finance transaction where the seller retains the title to the property. Does that sound like a raw deal? Not at all. Anyone who has financed a vehicle has entered into a similar transaction. The bank has the title, yet the person making the payments on the loan has the right to use the car, the right to exclude others from using it, the obligation to ensure, maintain and register the car, AND the right to profit from the sale of it. All these rights and obligations are the buyer's, so long as he makes the payments on the loan on time. Once the vehicle loan is paid off the bank will return the title to the borrower.
A Contract for Deed functions similar to this. Watch this video for an example of how to use this type of transaction to be fully transparent to the underlying mortgage holder, the seller, and to take all the homeownership advantages, including the interest deduction!

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