The third type of security interest in real property is the installment land contract. An installment land contract is an agreement between a buyer and a seller. Under this agreement, the buyer and seller agree on a specific price with respect to a piece of real property. Once that price has been agreed upon, the seller provides financing to the buyer to purchase the property. The reason why it is called an installment land contract is because the buyer is obligated to pay the debtor back in installment payments.

Under such an agreement, the buyer does not obtain legal title to the property until the full contract price has been paid to the seller who provided the financing. These agreements can have harsh consequences to buyers who fail to make their installment payments on a regular basis. In fact, if the buyer defaults on a payment, the seller can cancel the installment land contract, keep all of the money that the buyer already paid, and retake possession of the property. So, under an installment land contract, the seller can foreclose on the property. If you recall, with a mortgage, the sheriff is the only person who could conduct the foreclosure sale, and with a deed of trust, the trustee executed the foreclosure.

Next, let’s discuss sale-leasebacks.