Where this fits on the exam
| Official syllabus topic | Owner Financing and Installment Land Contracts |
|---|---|
| Official PSI area | Financing |
| Published area weight | 10% of the national portion |
| Exam portion | National salesperson portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes the weight for the complete content area, not a fixed question count for this lesson. Learn the rule well enough to apply it when PSI changes names, numbers, or parties in a new scenario.
The lesson
Purchase-money financing
The buyer gives the seller a note for part of the price, commonly secured by the purchased real estate. The contract must state principal, interest, payments, maturity, security, and default rights.
Installment land contract
The buyer usually receives possession and equitable rights while paying installments, but the seller retains legal title until the contract requirements are satisfied. Default remedies are governed by the agreement and law.
Wraparound financing
A new obligation wraps around an existing loan. The original loan remains, and a due-on-sale clause or payment failure can create serious risk.
Risk controls
Parties should address lien priority, taxes, insurance, title evidence, servicing, balloon payments, default, recording, and federal or state lending requirements.
Decision rule
Georgia-specific distinction
Worked example
Scenario. A seller receives monthly payments for five years and agrees to deliver the deed only after the final payment.
Reason it through. The buyer is paying over time while the seller retains legal title under the stated arrangement.
Answer. This describes an installment land contract rather than an immediate deed plus seller-held security deed.
Common exam traps
- Assuming owner financing is unregulated
- Confusing a land contract with an ordinary lease
- Ignoring an existing due-on-sale clause
- Assuming possession equals legal title
Original practice questions with detailed explanations
These questions were written for instruction and mapped to the current outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1A seller agrees to accept monthly payments for seven years and to deliver the deed only after the final payment. The buyer moves in right away. Who holds legal title during the payment period?
- A. The buyer, from the day of move-in
- B. The seller, until the final payment
- C. The closing attorney, in escrow
- D. Both parties, as tenants in common
Show answer and explanation →
Answer: B. The seller, until the final payment
In an installment land contract the seller keeps legal title until the contract is satisfied, while the buyer has possession and equitable rights. Choosing the buyer is the common mistake of treating possession as legal title.
- A. Incorrect. Moving in gives possession; it does not satisfy the agreement's condition for receiving the deed.
- B. Correct. Under this installment contract, the seller retains legal title until the required payments are completed.
- C. Incorrect. No fact says the attorney holds title; holding documents in escrow would be a separate arrangement.
- D. Incorrect. The payment agreement does not create shared ownership as tenants in common.
Question 2At closing, a buyer receives a deed, gives the seller a note for $60,000 of the price, and signs a security deed to the seller for that note. What is this arrangement?
- A. Installment land contract
- B. Wraparound loan
- C. Purchase-money financing
- D. Lease with an option to buy
Show answer and explanation →
Answer: C. Purchase-money financing
When the seller takes back a note secured by the property being sold, that is purchase-money financing. The land contract is wrong because here the buyer received the deed at closing rather than waiting until the last payment.
- A. Incorrect. A land contract defers the deed; this buyer receives the deed at closing.
- B. Incorrect. A wraparound includes an existing underlying loan within a new financing arrangement, which is not stated here.
- C. Correct. The seller finances part of the purchase price with a note secured by the property sold.
- D. Incorrect. An option grants a choice to buy later; this purchase has already closed.
Question 3A seller with an existing $150,000 loan sells for $250,000 on a wraparound note and uses the buyer's payments to keep paying the old loan. What is the most serious risk to the buyer?
- A. A due-on-sale call on the old loan
- B. Delay of title until the wrap is paid
- C. Personal liability on the old loan
- D. A ban on charging interest on the wrap
Show answer and explanation →
Answer: A. A due-on-sale call on the old loan
A wraparound leaves the original loan in place, so a due-on-sale clause or a missed payment by the seller can put the property at risk. Personal liability on the old loan is wrong because the buyer never assumed that debt.
- A. Correct. If the old loan permits a due-on-sale demand, the transfer can expose the home to acceleration and foreclosure.
- B. Incorrect. A wraparound does not by definition delay delivery of title until payoff; that is a land-contract feature.
- C. Incorrect. The buyer does not become personally liable on the old note without an assumption or other obligation.
- D. Incorrect. Wraparound financing is not subject to a blanket ban on interest, although applicable lending laws still matter.
Ready to move on?
You are ready for the next lesson when all of these are true.
- Explain Owner Financing and Installment Land Contracts in one clear answer without notes.
- Separate Purchase-money financing from Installment land contract using a fresh example.
- Apply the decision rule to a new fact pattern and name the fact that controls the result.
- State the Georgia-specific point or explain why the national rule applies unchanged.
- Answer every practice question and explain the rule each rejected option misapplies.
- Revisit this topic later in mixed practice without category labels.
Recommended next lesson
Continue with Specialty loan products. The specialty loans section of the loan types article covers other purpose-built loans, such as construction, bridge, reverse and home equity loans, so you can tell them apart from seller financing on the exam.
Return to the Financing hub to see every official branch and the complete lesson sequence for this content area.