Installment Sale
A real estate transaction where the buyer pays the purchase price in multiple payments over time rather than a single lump sum at closing. The seller typically retains legal title until the final payment is made, though the buyer may have equitable ownership and possession rights.
Example
“The seller agreed to an installment sale, receiving $50,000 down and monthly payments of $2,000 for the next 10 years.”
Memory Tip
Think of 'installing' payments like installing software - it happens in multiple steps over time, not all at once.
Why It Matters
Installment sales can help buyers who can't qualify for traditional financing purchase property, while providing sellers with steady income and potentially favorable tax treatment by spreading capital gains over multiple years. This arrangement can open opportunities when conventional financing isn't available.
Common Misconception
People often confuse installment sales with rent-to-own agreements, but in installment sales, the buyer typically has immediate possession and equitable interest in the property.
In Practice
A seller agrees to accept $2,000 monthly payments over 15 years for a $200,000 property, allowing a buyer with poor credit to purchase the home directly from the seller without bank financing.
Etymology
From French 'installer' meaning 'to place in position,' reflecting how payments are placed in position one at a time rather than all at once.
Common Misspellings
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