What security interests exist under a installment land contract?

😀 Real Property • Security Interests in Real Estate PROP#203

Legal Definition

An installment purchaser only gets legal title after the full price has been paid. Forfeiture clauses often allow vendors to cancel the contract, retake possession, and retain all money paid upon default.

Plain English Explanation

Usually, when someone buys a property, they ask a bank to help them buy it. The seller of the property then receives all of the money they ask for, and the buyer is left with a debt owed to the bank. In contrast, an installment land contract is an arrangement between the seller and the buyer. The buyer, who doesn't have enough money to buy the property in a single payment, offers to pay the seller for it over time. A contract is created that gives possession of the property to the buyer on the condition that they continue to make payments while the seller holds on to the title. The contract will make it so that when the full purchase price is finally paid plus interest, the seller must transfer title to the buyer.

These types of situations can create unfortunate circumstances for the buyer when they are unable to make a payment. These types of contracts can allow the seller to cancel the contract, re-take possession of the property, and keep all the money they had been paid if the buyer stops making payments.

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