Title is the legal relationship between an individual and the real property which they own which creates a right to that specific piece of property. An example of a title would be obtaining a loan from a bank to purchase real property.
The bank would then hold title to that property until the loan is paid off. Once the loan is paid off, the bank would transfer title to that property to the borrower, or buyer.
Title is distinguished from a deed in that the deed is the actual written document which conveys ownership of real property from one individual to another.
What Does Bond for Title Refer to?
Bond for title is a specific real estate term which refers to a method of real estate financing for the sale and purchase of real property. A bond for title is sometimes referred to using other terms, which may include a contract for deed or a bond for deed.
Using a bond for title arrangement, a seller retains the legal title to a property while a buyer makes periodic payments in installments. This means that the buyer makes payments instead of paying the entire purchase price for the property at closing.
When a bond for title is used, a seller will only transfer the title when a buyer has satisfied the required payment amounts. During the contract term of this type of purchase, a buyer is referred to as an equitable owner of the property being purchased.
This means that the buyer may be able to claim the various available benefits of owning the home, such as certain tax benefits. The buyer, however, is not permitted to legally claim possession of the title to the property until the contract terms are fulfilled.
Once the purchaser completes the payments, the seller then delivers the deed. In certain cases, the name of the purchaser may be placed on the title before they make all of the payments.
It is common for property sales agreements to involve a bond for deed. This is because the majority of purchasers do not have the funds to pay for the entire purchase price.
A bond for deed commonly involves a mortgage agreement. In some instances, a seller may finance the buyer themselves.
Why Should I Use a Bond for Title?
For a purchaser of a home, a bond for title may be very beneficial. For example, it may allow that buyer to use the contract period term to secure a more conventional long-term type of loan.
This may allow a buyer to utilize a property prior to having a secured mortgage loan or another form of financing. There are also advantages for a seller.
A bond for title arrangement may help a seller complete a real estate transaction in a much quicker time frame than using a more conventional route. For example, a seller may not be required to wait for the purchaser to qualify for a mortgage. Instead, a purchaser may begin issuing payments according to the terms of the bond contract.
In most cases, an average individual would typically prefer to pay in installments over time rather than by one lump sum. Additionally, a bond for deed allows a seller and a purchaser to specify different terms of the payment process, including:
- Overall total purchase price;
- Interest rates;
- Methods of payments;
- Legal remedies in the event of a breach of contract
Additionally, if there are provisions regarding insurance and tax rates, they may be tailored according to the needs of both the buyer and the seller during negotiations. Because of the various terms which have to be agreed upon, it is usually necessary to have the assistance of a lawyer during the negotiation and drafting stages.
What are Some Risks Associated With a Bond for Title?
It is important to be aware that bonds for title may also be risky. For a seller, there is always a risk that the purchaser may default on their payments.
Although a seller retains the deed to the land, they may have been able to secure a better deal during the bond for title contract period. There are also risks for a buyer in this situation.
For a buyer, there is a risk that a seller will refuse to transfer the deed upon the buyer’s completion of their payments. This issue may cause a lawsuit to be filed.
It can also cause strain between the purchaser and seller. In addition, there is a risk that a seller may violate their obligations as the property owner, which may include the duty to disclose whether there are highly dangerous risks associated with the property.
What are Some Types of Legal Disputes Associated With a Bond for Deed?
A bond for deed transaction may, in some cases, be associated with certain types of legal disputes. Similar to any other type of contract, the agreement between the buyer and seller may be subject to various disputes, which may include:
- Failure of the seller to transfer the deed after the payments have been completed;
- Failure of the buyer to make payments, in which case the buyer may forfeit their right to the deed; and
- Violations of warranty obligations associated with the deed, such as the guarantee that the seller is the legal owner of the property.
There are many legal disputes over bonds for deeds which arise because a contract was unclear or poorly written. This may occur, for example, if the parties attempt to complete the paperwork themselves.
It may also occur if the buyer and seller fail to seek professional guidance during the process. A clearly drafted bond for title agreement is the key to preventing various legal disputes or lawsuits from arising.
What if I Have a Dispute Over a Bond for Title?
In most cases, a dispute over a bond for title is typically handled similar to other types of contract agreements. The parties may be required to file a lawsuit in order to determine whether one of the parties violated a term of their agreement.
In the event of a breach of contract, the non-breaching party may be entitled to an award of damages to compensate them for their losses. This may require an in-depth analysis of the documents which apply to the transaction as well as an examination of any other evidence which may be relevant to the issue.
Do I Need a Lawyer if I Need Assistance With a Bond for Title?
It is essential to have the assistance of a real estate lawyer with a bond for title. A bond for title usually requires the assistance and guidance of an attorney, especially during the negotiation phase.
Using a bond for title can have advantages for both a buyer and a seller in a real estate sales transaction. In order to prevent a legal dispute or violation, it is advisable to hire an attorney for assistance with drafting the necessary documents.
Having a lawyer on your side will help ensure that your rights are being protected, your interests are being represented, and your agreement is not one-sided or in violation of the law. Your lawyer will also represent you in court if it becomes necessary to file a lawsuit over the dispute.