PSI Virginia Real Estate Practice Exam

What is the main feature of a contract for deed?

1. The seller retains possession while providing the buyer with title

2. The buyer pays rent until the contract is fulfilled

3. The seller allows immediate occupancy with no payments

4. The buyer assumes all maintenance responsibilities immediately

The correct answer is: The seller retains possession while providing the buyer with title

A contract for deed, also known as a land contract or installment sale agreement, primarily involves a seller who retains legal title to the property while allowing the buyer to take possession. This means the seller effectively holds the title until the buyer fulfills the terms of the contract, typically by making a series of payments over time. This arrangement benefits buyers who may be unable to secure traditional financing, as they can occupy the property while making payments towards ownership. Once the contract is fulfilled and all payments are made, the seller transfers the title to the buyer, thereby completing the transaction. The other options do not accurately reflect the structure of a contract for deed. For instance, the notion of the buyer paying rent until the contract is fulfilled implies a rental arrangement rather than the installment purchase nature of a contract for deed. Immediate occupancy without payments would not typically align with this type of contract, as it involves ongoing payments for the property. Lastly, while the buyer usually assumes some maintenance responsibilities, the main feature central to the contract for deed's definition is the seller retaining the title while the buyer occupies the property.