Note + mortgage / deed of trust
Buyer takes title at closing and signs a note secured by a lien. Closest to a bank loan; default is generally handled through foreclosure. Often the cleanest for both sides.
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Comparing the frameworks
How the deals are built
Note-and-mortgage, contract for deed, wraparound, lease-option — same goal, very different legal footing. Who holds title is the question that matters.
The core split: who holds title
Every owner-finance structure answers one question first: while the buyer is still paying, who holds legal title? That single fact drives your rights if something goes wrong, so it's worth understanding before you're attached to a parcel.
In a promissory note secured by a mortgage or deed of trust, the buyer takes title at closing and gives the seller a lien as security — essentially the same shape as a bank loan, with the seller in the bank's chair. If the buyer defaults, the seller must generally use the state's foreclosure process to recover the property. In a contract for deed (bond for title / land contract), the seller keeps legal title until the final payment, and the buyer holds equitable rights and possession along the way. The remedies on default can differ from a foreclosure, and that difference is exactly why an attorney should draft or review the instrument.
General information only, not legal, tax, or financial advice — consult an Arkansas real-estate attorney about which structure fits your deal and how Arkansas law treats each.
Common structures
The four you'll hear about
Plain-language sketches — not a substitute for an attorney drafting the paperwork.
Contract for deed (bond for title)
Seller keeps legal title until paid in full; buyer has possession and equitable rights. Common on rural land, but default remedies differ — get it drafted by an attorney and record it.
Wraparound ("wrap")
Seller carries a new note that 'wraps around' their existing mortgage. Powerful but delicate — an existing loan's due-on-sale clause can be triggered. Legal review is essential.
Lease-option
Buyer leases now with an option to buy later at set terms. Technically a lease plus an option, not a sale yet — the rights are narrower than they feel, so read the fine print.
Why the structure changes your protection
These aren't interchangeable labels. With a note and mortgage, the buyer owns the property and has the equity protections that come with holding title. With a contract for deed, the buyer doesn't hold legal title yet, so a missed-payment situation can play out differently than a foreclosure would — sometimes faster and with less cushion for the buyer, which is precisely why buyers should insist the contract be recorded and reviewed. A wraparound layers a new obligation over the seller's existing loan and can trip a due-on-sale clause, letting the underlying lender call the balance; it can work, but only with eyes open and counsel involved. A lease-option keeps the buyer as a tenant with a future right to purchase — useful, but weaker than ownership until the option is exercised.
The practical takeaway: don't choose a structure off a forum post. If you're the buyer, our buyer's guide covers protecting yourself; if you're carrying the note, the seller's guide covers qualifying and servicing. And if a deal falls apart, our sibling foreclosures guide and the wider Real Hot Springs hub can help you get your bearings. This is general information, not legal, tax, or financial advice — consult an Arkansas real-estate attorney before choosing a structure.
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