A contract for deed wouldn't be a good idea if the seller's mortgage has which type of clause?

• A. Alienation clause
• B. An alienation clause
• C. A prepayment clause
• D. An acceleration clause

Answer: (B)

The key idea here is how a mortgage clause that restricts transfer affects owner-finance arrangements. In a contract for deed, the seller keeps legal title until the buyer finishes payments, while the buyer has equitable title and possession. If the seller’s mortgage has an alienation clause (often called a due-on-sale clause), the lender can require the loan to be paid in full or prohibit the transfer if the property is sold or title is otherwise transferred to someone else. That means using a contract for deed would trigger the lender’s protection, making the arrangement risky or impractical for the seller because the loan could come due immediately or the lender could block the transfer. The other clauses don’t create this direct transfer restriction: a prepayment clause concerns penalties for paying off early, and an acceleration clause typically relates to default-related acceleration, not the mere transfer of ownership. So the alienation clause is the clause that makes a contract for deed unattractive in this scenario.