For those who have poor credit or are struggling to save for a home down payment, there is another way to pursue the American Dream—a contract for deed (CFD).

In a CFD, a buyer can move into a home and pay installment payments over time until he or she pays off the home. This arrangement can also benefit a seller who can’t seem to find a qualified buyer for the property.

The Rise of the Contract for Deed

This long-lived but little-used financing option has grown in popularity since the Great Recession, according to ATTOM Data Solutions. From 2010 through 2014, more than 103,000 CFDs were recorded nationwide, a 10 percent increase from the previous five years, according to ATTOM. The actual number is probably a little higher, as not all jurisdictions require CFDs to be publicly recorded.

CFDs are particularly prevalent in the Rust Belt and among lower value homes, ATTOM reported. The average CFD price was $87,010 between 2010 and 2014. During the same time, the average home sales price was $141,423.

An Unflattering Limelight

While CFDs have grown in popularity in recent years, they have also come into the spotlight in the news and have caught the attention of a few lawmakers. The New York Times looked into CFDs in mid-2016 and pointed out the potential ways they can negatively impact buyers.

“The home dweller has more limited protections than a person buying a house with a mortgage, and evictions are quicker than a foreclosure. The residents are typically responsible for repairs and paying all property taxes, but the legal title under a CFD does not transfer until the final payment is made—an end result that rarely happens,” the New York Times reported.

Lawmakers Take Notice

The New York Times piece caught the attention of Sen. Bob Menendez (D-New Jersey), who then wrote to the Consumer Financial Protection Bureau (CFPB) requesting it investigate CFDs and determine whether regulation is needed to protect consumers.

“Following a New York Times series investigating an alarming trend in the housing sector known as contract for deed homeowner financing, U.S. Senator Bob Menendez joined six colleagues in a letter to the Consumer Financial Protection Bureau regarding the lack of basic consumer protections for low- and moderate-income homebuyers who are being targeted by this practice,” stated a press release from Sen. Menendez. “[W]e respectfully request that you also examine the specific use of CFD homeowner financing, determine the national prevalence of CFDs, and consider whether regulation or other action in this area is needed.”

Neither the CFPB nor Sen. Menendez responded to requests for information on the CFPB’s response to Sen. Menendez or whether further investigation or regulation may be in the works.

The city of St. Cloud, Minnesota, has started observing CFDs, and Mayor Dave Kleis is hoping for legislation to regulate them. “Our priority is to have some type of ability for cities to regulate properties that clearly are being operated as rentals in the guise of contract for deed,” Kleis told the St. Cloud Times in January. “We don’t want in any way to hinder the 98 percent of contract for deeds that aren’t a challenge, but for those that are, we have to have some type of tool in place to protect neighborhoods.”

Kleis and other city officials think some are effectively avoiding landlord responsibilities such as property maintenance by offering a property under a contract for deed.

The Seller’s Perspective

While Sen. Menendez and Kleis are focused on protecting buyers entering into CFDs, the Minnesota Homeownership Center noted in an informational handout, “There can be great risks for both buyers and sellers.”

While the property is under contract, the seller remains the owner of the property, which means it is his or her responsibility to ensure property taxes and insurance are current. Of course, there is always the risk that the buyer will not be able to make payments at some point, which means the seller may have to deal with the process of canceling the contract and evicting the buyer.

Some sellers believe they can sell their homes through CFDs and then pay off their own mortgage loans when the buyer makes a balloon payment at the end of the contract. This is not the case, warned the Minnesota Homeownership Center.

“Selling a home on a contract for deed will be a default of any outstanding mortgage and trigger the acceleration clause, making the entire loan due and payable immediately, unless the lender approves the sale in writing in advance.”

The Positive Perspective

While CFDs have received some bad publicity and can pose some risks for sellers, they can be a welcome opportunity in a tight credit environment. For prospective buyers who don’t have enough for down payments, don’t have enough credit for traditional mortgages, or have less than perfect credit, CFDs can be a way to achieve the American Dream.

In fact, if the CFD is reported to a credit bureau, it can help improve the buyer’s credit score if the buyer makes payments on time. It is important to note that CFDs occur with private sellers who may not be reporting to a credit bureau.

It can also be an alternative for a seller who is having a hard time finding a buyer who qualifies for traditional financing. The Minnesota Homeownership Center recommends buyers and sellers work with Realtors to create a purchase and closing agreement.