A bond for deed is a form of real estate financing recognized under Louisiana law. In a bond for deed transaction, a buyer agrees to pay the purchase price to the seller in installments, while the seller agrees to transfer title to the property after the specified conditions of the agreement have been satisfied.
For commercial real estate transactions, a bond for deed can provide an alternative to traditional financing and may be considered when purchasing commercial property, land or other types of real estate.
How Does a Bond for Deed Work?
The specific terms of a bond for deed are established in a written agreement between the buyer and seller. Generally, the process works as follows:
- The buyer and seller agree on the purchase price and payment terms.
- The buyer makes payments according to the bond for deed agreement.
- The seller retains title to the property until the contractual requirements have been satisfied.
- Once the buyer satisfies the terms of the agreement, title is transferred to the buyer.
- A third-party title company may be designated to facilitate the transfer of title once the bond for deed has been satisfied and discharged.
What Does Louisiana Law Require?
Louisiana law establishes specific requirements for bond for deed transactions, including provisions addressing recordation, existing mortgages or privileges, escrow of payments and default.
For example, when property is already subject to a mortgage or privilege, Louisiana law requires a written guarantee from the mortgage or privilege holder regarding the release of the property upon payment of the stipulated release price.
Because the legal requirements and financial considerations can vary depending on the transaction, the specific terms of a bond for deed agreement are important for both buyers and sellers to understand.
Is a Bond for Deed Right for a Commercial Real Estate Transaction?
A bond for deed may be considered as an alternative to traditional financing in certain commercial real estate transactions. Whether it is appropriate depends on factors such as the property, purchase price, payment structure, existing liens or mortgages and the financial and legal circumstances of the parties involved.
Buyers and sellers should consult qualified legal and financial professionals to understand the specific requirements, risks and implications before entering into a bond for deed agreement.
Commercial Real Estate in Louisiana
Understanding financing options is an important part of evaluating a commercial real estate transaction. Property One provides commercial real estate brokerage and advisory services throughout the Greater New Orleans and Louisiana markets.
Have a question about a commercial real estate transaction? Contact David da Cunha or the Property One team to learn more.
This article is provided for general informational purposes only and is not intended to constitute legal, financial or other professional advice.
