Installment Contract
Definition and meaning of Installment Contract in real estate.
An installment contract is a real estate agreement in which the buyer makes regular payments to the seller over time, but the seller retains legal title to the property until the purchase price is paid in full. The buyer receives equitable title and the right to occupy the property immediately.
In more detail
Also known as a land contract or contract for deed, this transaction is a form of seller financing that bypasses traditional mortgage lenders. It is often utilized by buyers who cannot qualify for a bank loan due to credit issues, or when financing costs are high.
The buyer is typically responsible for maintaining the property, paying property taxes, and keeping the home insured during the contract term. If the buyer defaults on payments, the seller may be able to reclaim the property and keep all prior payments, subject to state laws.
Key facts
| Category | Legal, Titles & Closing |
|---|---|
| Also known as | Land contract, contract for deed, or installment land contract |
| Title ownership | Seller holds legal title; buyer holds equitable title during the contract term |
| Watch out for | Forfeiture of all paid equity if the buyer defaults on payments |
A buyer signs an installment contract to purchase rural acreage, agreeing to make monthly payments to the owner for ten years before receiving the deed to the property.
Frequently asked questions
Who pays property taxes in an installment contract?
Typically, the contract requires the buyer to pay the property taxes and insurance directly, although the seller remains the legal owner of record.
Can the seller mortgage the property during the contract?
Yes, unless the contract prohibits it, but the seller must be able to deliver clear legal title once the buyer pays off the contract.
Related terms
Sources & references
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