Conditional Sale
Definition and meaning of Conditional Sale in real estate.
A conditional sale is a transaction where the buyer takes possession of a property, but the seller retains the legal title until the buyer fulfills all contract conditions, typically paying the full purchase price.
In more detail
This type of agreement is often used in owner financing, land contracts, or contract for deed arrangements. While the buyer gains equitable title, meaning they have the right to occupy and use the property, they do not hold legal title and cannot sell or refinance the property without the seller's consent.
If the buyer defaults on payments, the seller can typically reclaim possession of the property more easily than through a standard foreclosure process. Buyers must exercise caution, as they risk losing their entire investment and any home equity if they fail to make the final payments.
Key facts
| Category | Legal, Titles & Closing |
|---|---|
| Also known as | Land contract, contract for deed, installment sale |
| Title status | Seller retains legal title; buyer receives equitable title |
| Risk level | High for buyers in the event of default |
An investor purchases a commercial warehouse through a conditional sale contract, agreeing to make monthly payments to the owner over a set number of years before receiving the deed to the property.
Frequently asked questions
Who is responsible for property taxes in a conditional sale?
While the seller holds legal title, the purchase agreement typically requires the buyer to pay property taxes, insurance, and maintenance costs.
What happens if the buyer defaults under a conditional sale?
Depending on state law, the seller may terminate the contract, keep all previous payments as rent, and evict the buyer from the property.
Related terms
Sources & references
See our sources and editorial standards.