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Sharp Thinking

No. 148 Perspectives on Developments in the Law from Sharp-Hundley, P.C. March 2018

Installment Sales Act Provides New Protections

For Some Purchasers By Contracts For Deed

By Michael L. Olson, Michael@sharp-hundley.com, 618-242-0200

In newly-enacted legislation that went into effect January 1, 2018,
additional protections were added for individuals who purchase their
home on an installment sales contract.

Also known as a contract for deed, an installment sales contract
allows the purchaser to obtain financing directly through the seller by
delaying the transfer of title until the installment payments are completed.

For many prospective homebuyers, installment sales contracts offer
a convenient and practical alternative to traditional financing through a
mortgage loan from a bank. An installment sales contract allows a buyer
to live in a home while paying the purchase price to the seller over a
period of time. This option especially is attractive for buyers who
ordinarily may not qualify for a mortgage loan from a bank. Olson

Although an installment sales contract to purchase a home may sound like a great alternative to
traditional mortgage loans, there are a few downsides that an unscrupulous seller could abuse to the
detriment of less sophisticated buyers. For instance, many installment contracts may include a
forfeiture provision that purports to allow the seller, upon the buyer’s default, to sue for possession of
the home and retain all previous payments made by the buyer. In other words, a buyer’s equity in the
home may not be protected until the contract has been fully paid off.

As a result, the act institutes a number of new disclosures intended to
provide transparency and protection to buyers. This includes a new
disclosure by the Office of the Attorney General providing consumers with
information about their rights under installment sales contracts. The act also
requires sellers to notify buyers of their right to obtain a third-party inspection
or appraisal of the home. The seller also is required to warrant that the
home is not subject to any known building code violations or to
condemnation by a local government.
These disclosures are important because installment contracts typically require the purchasers to
pay for any necessary repairs out of their own pocket. So it is important that buyers ensure that the
home they are buying does not contain any violations or defects before purchasing.

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Sharp Thinking is an occasional newsletter of Sharp-Hundley, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp Thinking
shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein constitute
educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal advice on
your particular situation, contact a Sharp-Hundley lawyer at the phone number or one of the addresses provided on page 2 of this newsletter.