Decades ago, Escrow Services, Inc. created the Installment Option Contract and is the only commercial administrator that has the experience and expertise required to properly service Installment Option contracts. We have helped to facilitate thousands of option contracts and private mortgages throughout the country. This agreement has been judicially determined not to be Bond for Deed.
An Installment Option is a contract wherein payments are made in installments. Consider it a “lease purchase” wherein “lease” payments are replaced with interest payments. Just as with a Bond for Deed, a Memorandum of the contract is recorded in the public records to protect all parties.
The Installment Option contractually incorporates many of the positive features that are statutorily provided in a Bond for Deed contract in Louisiana, protecting both Seller and Buyer. Therefore, the Installment Option is an instrument used in lieu of a Bond for Deed outside the state of Louisiana. It is utilized in Louisiana in unique circumstances where the parties do not wish to use a Bond for Deed.
To protect all parties, a full title review and notarized documents are required. Escrow Service, Inc. a third party administrator, is appointed and becomes the owner’s agent to handle property insurance, tax, and underlying mortgage issues. As with the Bond for Deed, we collect the payments, pay underlying mortgages, and issue IRS 1098 & 1099 interest reports. In the event of nonpayment, the administrator sends the required notices.
Use an Installment Option whenever the owner will finance all or a portion of the sales price. Canceling an option for non-payment is much less costly than foreclosure.
Use an Installment Option to save closing costs. When you buy or sell property under the Installment Option contract, you do not have to pay ‘points’, appraisal and survey fees, private mortgage insurance (PMI), or repairs required by the mortgage company before it will make a loan.
Use an Installment Option whenever an existing mortgage has restrictions against assumptions, land contracts, contracts for deed, Bond for Deed and transfer or beneficial interest under a land trust. The owner can ‘wrap’ existing mortgages within the terms of the Installment Option.
Use an Installment Option whenever the Purchaser or the property doesn’t qualify for a loan. Many would-be Purchasers cannot qualify for a new mortgage… sometimes the property does not qualify… the reasons are endless. The terms of the Installment Option are strictly between the owner and the Purchaser.
The purchaser is responsible for repairs, maintenance, etc. after the closing of the Installment Option contract.
Property insurance is issued in the owner's name with purchaser paying the premiums and named ‘Additional Insured’.
The IRS treats an Installment Option the same as an installment sale for interest and depreciation purposes.
In the event the owner files a bankruptcy action, the purchaser is protected by the U.S. Bankruptcy Code, provided the Memorandum of the Installment Option is recorded in the public records.
The Installment Option allows the owner to cancel the contract and take back the property if payments are not made within the time allowed and without thecostly expense of foreclosure.
An Installment Option Contract is a unique agreement where the purchaser makes payments in installments, similar to a “lease purchase,” but where lease payments are replaced with interest payments. Unlike a Bond for Deed, which is strictly governed by Louisiana statutes, the Installment Option was pioneered by Escrow Services Inc. as a flexible alternative that has been judicially determined not to be a Bond for Deed.
Yes. When properly structured and recorded, Installment Option Contracts are a valid way to facilitate owner-financed transactions. We ensure that a Memorandum of the contract is recorded in the public records to protect the interests of both the buyer and the seller, providing legal transparency for all parties involved.
Real estate transactions involving long-term payments require meticulous record-keeping. As a neutral third-party administrator since 1985, we provide an “audit trail” for every payment, manage tax and insurance impounds, and issue annual IRS 1098 and 1099 interest reports, ensuring the transaction remains professional and compliant.
Yes. One of the primary benefits of an Installment Option is its utility when an existing mortgage has restrictions against assumptions or “due-on-sale” clauses. It allows an owner to “wrap” existing financing within the terms of the new contract, with Escrow Services Inc. ensuring the underlying mortgage payments are made timely.
To protect the property and the seller’s interest, we typically set up an escrow account. We collect a portion of the taxes and insurance with each monthly payment and disburse those funds to the parish and insurance provider when they are due. This prevents the risk of the property falling into tax sale or losing coverage.
Generally, the IRS treats an Installment Option the same as an installment sale for interest and depreciation purposes. However, because tax laws vary based on individual circumstances, we always recommend consulting with a tax professional. We provide the necessary annual reporting to make this process seamless for both parties.
One of the advantages for sellers is that canceling an option for non-payment is typically much faster and less expensive than a traditional judicial foreclosure. If a payment is missed, our team handles the delivery of formal legal notices required to initiate the cancellation process according to the contract terms.
Yes. If the Memorandum of the Installment Option is recorded in the public records, the purchaser is generally protected by the U.S. Bankruptcy Code. This recording is a standard part of our setup process to ensure the buyer’s equitable interest is shielded.
Under most Installment Option agreements, the purchaser is responsible for all property maintenance and repairs after the closing. This gives the purchaser “pride of ownership” and treats the property more like a purchase than a rental.
The process begins with a full title review and notarized documents. You can contact our Mandeville or New Orleans area representatives to receive our New Account Intake Forms. We act as your agent to handle the paperwork, payment processing, and ongoing compliance.
A third-party administrator like Escrow Services Inc. removes the “personal” friction from the deal. We provide objective payment histories that help buyers qualify for traditional refinancing later, and we ensure sellers receive their funds without having to manually track interest or chase late payments.
Absolutely. Installment Options are an ideal solution when the purchaser or the property doesn’t meet strict bank criteria. The terms—including down payment and interest rate—are strictly between the owner and the purchaser, providing a path to homeownership that might otherwise be unavailable.
