Unit 1 Chapter 19 Review

Question 1

Define a land contract.

Answer 1

A contract in which the seller finances the sale of real estate in installment payments from the buyer rather than financing through a third party lender.

Question 2

Explain equitable conversion.

Answer 2

Equitable conversion is treating land as personal property under certain circumstances. It gives the buyer a real property interest from the date the land contract is signed.

Question 3

Define amortization.

Answer 3

This is the length of time a land contract will run. It depends on the size of the contract, monthly payment, and interest rate being charged.

Question 4

In which type of land contract does the seller earn interest on the difference between what the seller owes on an existing loan and what the buyer is paying for the property?

Answer 4

Wrap-around contract

Question 5

In which type of land contract does Indiana have no provisions in the Codes?

Answer 5

Power of sale

Question 6

How can a forfeiture clause affect the buyer in a land contract?

Answer 6

If the land contract contains a forfeiture clause and the buyer defaults on payments, the seller can end the contract, take possession of the property, and keep the payments made by the buyer.

Question 7

What does an acceleration clause do?

Answer 7

This clause allows the seller to force the buyer to refinance the property if the condition of the property becomes a risk to the seller’s financial investment.