Land Installment Contracts
What Is an Installment Contract?
An installment contract is an alternative to traditional mortgage financing. Under an installment contract, the buyer gets possession of the property and makes installment payments of the purchase price over an extended period of time to the seller, who conveys legal title to property once the purchase price is fully paid.
While the installment contract is a security device, it lacks many of the formalities and buyer protections included in mortgage laws. The majority of installment contracts include a forfeiture clause, which allows a seller, upon buyer’s default, to end the contract, regain possession of the property, and keep all payments made by buyer. Compared to mortgage foreclosure, the seller can recover the property more quickly because he or she is not required to sell the property, observe notice and redemption rights, or file a court case. However, for a court to enforce forfeiture of an installment contract, the right of forfeiture must be expressly provided for in the contract.