Pick by Who Holds Title, Not by the Document Label
The labels blur on seller-financed deals. Choose between a Bond for Deed, lease purchase, or installment option based on who holds title and equity.
A title company gets a file where a Purchaser and a Seller have agreed to terms on a seller-financed deal. The document they bring to the closing table is downloaded from the internet. The label at the top says "Contract for Deed," but the payment terms look exactly like a residential lease. The default clause reads like a commercial mortgage. The closing attorney is left to figure out what the document actually does.
Rates dictate the market. On May 14, 2026, the Freddie Mac 30-year fixed-rate mortgage averaged 6.36 percent [https://www.freddiemac.com/pmms]. ICE's 30-year conforming index hit 6.04 percent earlier in the year on January 9, putting roughly 4.8 million borrowers in a position to refinance [https://mortgagetech.ice.com/resources/data-reports/february-2026-mortgage-monitor]. Sellers remain highly motivated to provide owner financing for buyers who still need an alternative to conventional loans.
The problems start when parties fixate on the title of their document. We know the useful question is who owns the house during the payment period and what the buyer is actually building.
Who holds title during the payments?
Play video: General information on Bond for Deed
Let us start with ownership. In an ordinary sale, ownership transfers as soon as there is agreement on the property and the price. The buyer receives the deed immediately. If the seller provides financing, the seller takes back a mortgage.
Seller-financed agreements that defer the transfer of title are fundamentally different. Under La. R.S. 9:2941, a Bond for Deed is a contract to sell real property where the price is paid in installments, and the seller agrees to deliver title only after a stipulated sum is paid.
The seller remains the owner of record during the entire payment period. The buyer gets full use of the property, but does not hold title while making those installments. This distinction is the bedrock of the contract.
What about documents labeled "Contract for Deed" or "Land Contract"? The Louisiana Revised Statutes do not actually define the term "Contract for Deed." We know this causes confusion.
Regulators look past the label. The Louisiana Office of Financial Institutions (OFI), the regulatory body that licenses and examines Escrow Services, states that its oversight includes any contract for deed. In fact, their Bond for Deed licensing covers any transaction operating as a conditional sale of real property, however it happens to be labeled. If it operates like a Bond for Deed, it is treated like one.
What exactly is the buyer building?
Once the title question is answered, the next issue is the money. What exactly is the buyer building with their monthly payment?
In a Bond for Deed, the purchaser makes payments toward a purchase price. The buyer enjoys the benefits of ownership rather than tenancy. They build equity through loan amortization and property appreciation.
Escrow Services manages these contracts by tracking the principal and interest portions of every single payment. As a licensed professional third-party administrator, we handle the ACH drafting using a direct payment authorization form. We track the balances and manage the tax and insurance funds.
A Lease Purchase Agreement functions entirely differently. The buyer is paying rent for the use and enjoyment of a property for a specific term. This arrangement pairs a standard lease with an option to buy.
A Lease Purchase buyer is not paying down a principal balance. ESI services these files by collecting rent and tracking rent credits on a completely separate ledger. Option money and security deposits are kept distinct from the monthly rent. You cannot fit a square peg into a round hole by treating rent payments as loan amortization.
The Installment Option Contract alternative
When parties want the mechanics of a Bond for Deed outside of Louisiana, the rules shift again. ESI services Bond for Deed contracts only in Louisiana, but we service land contracts, leases, and lease purchases in all 50 states.
We created the Installment Option Contract decades ago for this exact situation. It is used in lieu of a Bond for Deed outside Louisiana. Many servicers lack the experience to properly service them. We offer this service in some states, though not all.
This contract is described as a lease purchase where the lease payments are replaced with interest payments. A memorandum is recorded in the public records to protect the parties.
Setup requires a full title review and notarized documents. We step in to become the owner's agent for insurance, taxes, and underlying mortgages.
The structure is highly specific, but it illustrates the point perfectly. The seller retains title until the option is exercised, but the buyer's financial position is distinct from a standard rental agreement.
Managing the contract reality
Parties can call their paperwork whatever they want. The reality of the contract is defined by ownership and equity. Getting those mechanics right from day one is critical.
When a buyer eventually wants to refinance to pay off the contract and take title, they need a complete, accurate payment history. Mortgage underwriters look closely at these payment records.
If a buyer has been making Bond for Deed payments to a licensed escrow agent, underwriters view those as mortgage payments to an independent third party. They treat the buyer's new conventional loan as a refinance rather than a purchase loan.
If the file was a Lease Purchase, the underwriter needs to see the distinct tracking of rent credits and option money. If the parties managed it themselves and commingled rent with a fictional principal balance, the refinance stalls.
Escrow Services acts as a neutral third party in these deals. We review documents to ensure financial integrity begins before the contract is even signed. Title companies or attorneys simply send us the Document Preparation Form. We draft the closing documents, send a draft for approval, and email the final package.
Our fee structure is straightforward. For Bond for Deed servicing, ESI charges a one-time setup fee of $475.00 and a monthly service fee of $40.00. The parties choose whether the buyer or seller pays that monthly fee.
If a payment is not received within the grace period, the purchaser pays 10 percent of the total payment due, which covers a 5 percent collection fee to ESI and a 5 percent late fee to the lien holder or owner. We handle the automated collection, disbursement, and all the IRS reporting. We do not act as a collection agency or property manager. We simply manage the contract correctly.
Contact us today at (985) 626-3727 or email service@EscroServ.com to discuss your seller-financed files.
Sources
- Freddie Mac 2026-05-14
- ICE Mortgage Monitor 2026-02-09
