What type of clause in a seller's mortgage would make a contract for deed a bad idea?

An alienation clause in a seller's mortgage is significant because it restricts the transfer of the property without the seller's consent. Specifically, this clause typically stipulates that if the borrower sells or transfers their interest in the property, the lender has the right to demand immediate repayment of the outstanding loan balance.

In the context of a contract for deed, this clause can create complications. A contract for deed involves the seller financing the sale of the property while retaining legal title until the buyer has fulfilled the payment terms. If the buyer wishes to sell the property before paying off the contract, the alienation clause can trigger an acceleration of the loan owed to the original lender. This means that the buyer would face challenges in transferring the property without settling the mortgage first, which can undermine the purpose of utilizing a contract for deed.

This makes it a bad idea to enter into a contract for deed if the underlying mortgage contains such a clause, as it creates potential barriers to flexibility in the transaction.