A properly drafted bond for deed contains a feature that many people find counterintuitive: a special mortgage.
This special mortgage is not given by the buyer to the seller. Instead, it is a mortgage granted by the bond for deed seller to the bond for deed buyer.
Why This Seems Backward—but Isn’t
Most people assume that a mortgage must be given by the purchaser of property to the owner of the property. However, in a bond for deed transaction, the buyer does not receive legal title until the bond for deed is paid in full.
Because the buyer does not yet hold title, the buyer cannot grant a mortgage. Only the titleholder can do that.
Accordingly, the seller, who still holds legal title, grants a special mortgage in favor of the buyer.
Purpose of the Special Mortgage
This special mortgage serves two critical protective functions:
- Prevents Improper Sale or Encumbrance
Once recorded, the special mortgage encumbers the property, making it impossible for an unscrupulous or dishonest seller to:- Sell the property to someone else and deliver clear
- Further encumber the property without addressing the buyer’s recorded interest
- Provides a Powerful Enforcement Mechanism for the Buyer
If the bond for deed buyer:- Fully complies with the bond for deed
- Pays the balance in full according to its terms
…and the seller (or the seller’s heirs) refuses or fails to convey title, the buyer has a legal remedy.
In that situation, the buyer may:
- Engage an attorney
- Foreclose on the special mortgage
- Take title to the property through foreclosure
This ensures the buyer is never dependent solely on the seller’s cooperation to obtain title after full performance.
Why This Matters
This special mortgage is a core protection for the bond for deed purchaser and is not found in:
- Lease agreements
- Lease-options
- Lease-purchase arrangements
- Informal rent-to-own structures
Those arrangements do not provide the buyer with a recorded security interest or an enforceable foreclosure right.
The Bottom Line
Although it may seem counterintuitive, the special mortgage:
- Is legally necessary
- Protects the buyer’s equitable ownership
- Prevents fraud or double-sale risk
- Guarantees a path to title if the seller fails to perform
It is one of the most important—and most misunderstood—features of a properly structured bond for deed.
