Impact
Installment sales are a valuable tool to help sellers defer tax. As with any other seller financing, however, the seller is generally at risk with respect to the buyer's creditworthiness or ability to manage the asset. The seller may often retain a lien against the property to secure payment of the installment obligation, which itself may or may not be evidenced by a promissory note.
The installment sale allows buyers to obtain an asset such as real estate without bank financing. The seller is then at risk of buyer default and the consequential repossession/foreclosure of the asset.
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