PSI New Jersey Real Estate State Practice Exam

A land contract is also known as which of the following?

1. Installment agreement

2. Leasehold contract

3. Contract for deed

4. Mortgage agreement

The correct answer is: Contract for deed

A land contract is commonly referred to as a contract for deed. This legal arrangement allows a buyer to make payments over time to the seller for the purchase of the property, with the seller retaining the title until the buyer fulfills the payment terms. This method of financing benefits buyers who may not qualify for traditional mortgages, as it offers an alternative way to purchase real estate. In a contract for deed, the seller provides a document that outlines the terms of the sale, including the price, payment schedule, and conditions that must be met for the transfer of full ownership. Once the buyer completes the payments, the title is transferred to them. This process can be advantageous for both parties; the seller continues to hold title and can repossess the property if the buyer fails to make payments. Other options do not correctly describe a land contract. An installment agreement generally refers to various forms of payment plans, not specifically tied to real estate. A leasehold contract pertains to rental agreements and does not involve ownership transfer. A mortgage agreement is distinctly different as it involves a loan secured by property, with the lender holding a lien on the title. Thus, 'contract for deed' accurately captures the essence of a land contract.