Real Estate Contract Options in Washington
Alternative financing arrangements can have advantages—and disadvantages
By Judy Malmon, J.D. | Last updated on January 27, 2023Use these links to jump to different sections:
If you’re buying or selling a house, certain procedures and financing options are so commonplace they’re unquestioned in many transactions. But, because the purchase or sale of a home is one of the most significant financial events in a person’s life, a one-size-fits-all solution is hardly ever the best choice. One choice to consider, whether you’re the buyer or the seller, is a real estate contract—which is also known as a contract for deed or land installment contract.What It Is

Pros and Cons: Buyer
A real estate contract can be attractive to a buyer because:- The buyer can’t get a traditional mortgage due to poor credit, inadequate employment history or other reasons, but yet can manage regular monthly payments
- There are no origination fees or closing costs, which can save thousands of dollars
- Often a smaller down payment is required
- The process is quicker, simpler and more flexible than bank financing
- Interest can be deducted like mortgage interest
- Having a direct relationship with the seller allows for flexible negotiation on terms like price, payment schedule, pre-payment options, title encumbrances, and improvements
- The buyer doesn’t own the property until the contract is paid in full
- Buyer must arrange and pay for title examination, appraisal and inspection
- Seller will generally set a higher rate of interest based on their increased risk
- There is a shorter time to cure default than with a traditional mortgage, and the seller has the option of either cancelling the contract or pursuing foreclosure
- If you’re using your contract payments to improve your credit so you can get a mortgage, you’re dependent on the seller to report payments to a credit agency
Pros and Cons: Seller
Upsides for a seller to consider:- The sale can be quick and efficient, saving costs and delays of bank financing
- Title examination and appraisal are the responsibility of the buyer (note that Washington requires all sellers of residential real estate to provide disclosures to the buyer, including for defects you should know about)
- If you’re selling non-conforming property that wouldn’t qualify for financing
- Can be a way to earn regular income from owned real estate
- If the buyer defaults and the seller needs to reclaim the property, the forfeiture process usually takes around 100 days—which is quicker than a foreclosure.
- In the event of default, the seller may keep all money already paid, and also reclaim the property
- As with the buyer, having a direct negotiating relationship can allow for flexibility to meet individual needs
- There’s a risk that the buyer will default on payments
- The property will remain in your name for many years during term of contract
- The seller won’t receive all money until completion of contract
- Negotiating and enforcing the contract will take more ongoing effort than would an outright sale
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