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A contract in which the seller retains title to the item sold, but the item is given to the purchaser so long as he or she is not in default on any of the conditions of the contract; sometimes called an executory contract. Under this kind of contract, the seller has a security interest in the property, and the buyer has an equitable interest.

Usually, personal property (such as an air conditioner, hot tub, or an appliance) is the subject of a conditional sales contract. When real property is the subject of the contract, the contract is called a contract for deed. Upon the buyer’s full performance of the conditions of the conditional sales contract, the seller must transfer legal title to the buyer. The conditional sales contract creating a security interest in a fixture or in an article that will become a fixture has been replaced under the Uniform Commercial Code by an instrument known as a security agreement.
Dearborn Real Estate Education
This "Word of the day" is excerpted from The Language of Real Estate, 6th Edition by John Reilly (published by Dearborn Real Estate Education, 2006 copyright). To purchase the complete book, with over 2800 key terms and definitions, or to browse through Dearborn's hundreds of other professional real estate titles, including Real Estate Technology Guide by Klein, Barnett, Reilly, click here.