What are houses for sale on contract?

Selling a home on contract is a financing option whereby the buyer makes monthly payments to the owner instead of getting a mortgage loan from a lender. The buyer assumes responsibility for the home's maintenance and repairs, but does not actually own the home until the contract is fulfilled.

The contract for this type of home purchase is unlike a traditional mortgage, as the owner may not need to go to court to repossess the home if the buyer defaults. In this case, the buyer gets evicted and loses all payments made. Homes sold on contract sometimes start with a regular monthly payment for a fixed term followed by a large balloon payment for the remaining purchase price.