Conditional Sales Agreement

A conditional sales agreement can come in very handy if you need a piece of equipment or want to buy real estate and don't have enough cash at the moment to pay the entire amount. Or...perhaps you don’t qualify for a bank loan and the seller has agreed to finance the purchase. You'll be able to take possession, but the title stays with the seller until you pay off the full purchase price. Payments are made in installments over a certain amount of years, and you might not even have to make a down payment. However, if you stop making payments, the seller has the right to repossess the property or the equipment.

Connie and Bill want to buy a house without a down payment, and their credit history is, uh...not great. They meet Jean and Bob, who are ready to retire and move to a smaller home. They also don't feel like paying for a lot of repairs in order to put the house on the market.

After speaking with their attorney and coming up with a strong contract, they agree to a conditional sales agreement with Connie and Bill, in which they will pay $500 a month over 20 years to pay off the $120,000 loan. They can move in right away, but will not officially own the house until the loan is paid off. If they miss any payments, Jean and Bob can reclaim the house without going through an expensive foreclosure process, like a bank would have to do in a typical mortgage loan.