My wife and I are purchasing a home with a "contract for deed". I know we can rent it out, improve on it etc. But we have come across a situation that would be more beneficial for my family and their family were they to buy the home that we have through "contract for deed". Providing the other family is able to get bank financing, and we honor our original contract, is this legal?

Sure it's "legal", assuming the contract has no prohibition against you assigning your rights under the contract, but it's likely that the lender who would extend financing to the "other family" will insist that the contract be paid off as a part of the refiancing.

Thank you AK lawyer. There is nothing restricting this in the contract itself. And yes, our intentions would be to have the contract paid as part of the closing. Again, thank you.