Illinois Real Estate Practice Exam

What does a buyer have when purchasing a home under an installment contract until completing the payment to the seller?

1. Acceleration Clause

2. Alienation Clause

3. Equitable Title

4. Prepayment Penalty Clause

The correct answer is: Equitable Title

When a buyer purchases a home under an installment contract, they acquire what is known as equitable title. This means that while the legal title is held by the seller until the buyer completes all the payments, the buyer has a right to possess and enjoy the property. Equitable title grants the buyer certain rights and interests in the property, allowing them to benefit from its use and even to sell their interest in it, subject to the terms of the contract. In this context, the other options pertain to different concepts that do not apply specifically to the rights of the buyer in an installment contract scenario. An acceleration clause, for instance, allows a lender to require full repayment of a loan if certain conditions are met, while an alienation clause involves the transfer of property ownership by the borrower. Additionally, a prepayment penalty clause pertains to the penalties incurred for paying off a loan before its due date, which does not directly relate to the installment purchase process. Thus, the concept of equitable title is most relevant to a buyer's rights in this specific situation.