Installment contract

Key Takeaways

• Under a Washington real estate contract the buyer takes possession and pays the seller over time while the seller keeps legal title as security for the purchase price.
• Chapter 61.30 RCW lets a seller forfeit the contract instead of foreclosing, which cancels the buyer's rights and lets the seller keep every payment already made.
• A notice of intent to forfeit must set a cure date no less than ninety days after the notice is recorded, under RCW 61.30.070(1)(e).
• Installment contract, land contract, and contract for deed all name the same arrangement.

What It Means

An installment contract is seller financing in its most direct form. The buyer moves in and pays the seller in installments, while the seller keeps legal title as security until the last payment clears. Only then does the seller deliver a fulfillment deed. Washington statutes call this instrument a real estate contract, and buyers and sellers often call it a land contract or a contract for deed.

What the buyer holds in the meantime is Equitable Title, the right to possess the property and to receive Legal Title once the price is paid in full. That split is what makes the arrangement useful and what makes it risky. There is no bank, no lender underwriting, and no loan approval, so a buyer who cannot qualify for a conventional mortgage can still buy. In exchange, the buyer takes on a seller who can cancel the deal far faster than a lender could foreclose.

Recording matters here more than most students expect, because chapter 61.30 RCW builds its forfeiture notices around who holds a recorded interest in the county where the property sits.

How It Works in Washington

Washington defines the instrument in RCW 61.30.010(1). A real estate contract is any written agreement for the sale of real property in which legal title to the property is retained by the seller as security for payment of the purchase price, and the definition expressly excludes earnest money agreements and options to purchase.

The teeth sit in the forfeiture procedure. Chapter 61.30 RCW lets a seller cancel the buyer's rights without a judicial Foreclosure. The seller records a notice of intent to forfeit in each county where any of the property is located, and RCW 61.30.070(1)(e) requires that notice to state a cure date not less than ninety days after the notice is recorded, or any longer period the contract provides. If the default is not cured, the seller records a declaration of forfeiture. RCW 61.30.070(1)(f) spells out the consequences: the buyer's rights under the contract are canceled, all sums previously paid belong to and are retained by the seller, the buyer's rights in improvements and in unharvested crops and timber pass to the seller, and occupants must surrender possession ten days after the declaration of forfeiture is recorded.

The buyer is not defenseless. RCW 61.30.090(2) lets any holder of a recorded lien, any guarantor, and any surety cure the default before the cure period expires, acting alone or together. RCW 61.30.070(2)(g) requires the declaration of forfeiture to state that the buyer may sue to set the forfeiture aside by filing and serving a summons and complaint within sixty days after the declaration is recorded, if the seller had no right to forfeit or failed to follow the chapter in any material respect.

Example

Ruth Delgado sells her Yakima rental to Ben Iverson on a real estate contract for $265,000. Ben pays $20,000 down and $1,650 a month, and Ruth keeps legal title until the balance is paid. Ben records the contract in Yakima County and moves in.

Three years and $59,400 of payments later, Ben loses his job and misses four payments. Ruth records a notice of intent to forfeit on March 2 setting a cure date of June 2, which is ninety-two days out and satisfies the ninety-day floor in RCW 61.30.070(1)(e). Ben cannot raise the money and no lienholder steps in to cure. Ruth records a declaration of forfeiture in June, keeps the $20,000 down payment and the $59,400 in installments, and Ben must surrender possession ten days after the declaration is recorded.

Common Mistakes and Exam Traps

• The seller keeps legal title under a real estate contract, but the buyer holds equitable title and the right of possession. An answer saying the buyer owns nothing until the last payment is wrong.
• Forfeiture under chapter 61.30 RCW is not foreclosure. Forfeiture cancels the buyer's rights and lets the seller keep the payments, while foreclosure runs through the courts and ends in a sale.
• The ninety-day cure period runs from the date the notice of intent to forfeit is recorded, not from the date the buyer first missed a payment.
• Installment contract, land contract, and contract for deed are three names for one instrument, and exam items use them interchangeably.