The correct answer is B, Equitable title. Under the traditional installment land-contract structure, the seller retains legal title as security while the buyer obtains the beneficial or equitable interest through the purchase agreement and possession.
As the buyer performs the contract by making the required payments, the buyer ' s equitable interest increases until the conditions for transfer of legal title have been satisfied.
This differs from a conventional mortgage-financed purchase, where legal title is ordinarily conveyed to the buyer at closing and the lender receives a mortgage security interest.
The concept of equitable title also appears more broadly once a binding contract for the purchase and sale of real estate has been formed, although the precise legal consequences depend on jurisdiction and transaction structure.
An installment land contract should not be treated casually because default remedies, title status, liens, recording, consumer protections, and financing consequences can be complicated. Licensees should recognize the examination concept while referring substantive legal drafting and interpretation to attorneys.
Study Guide Reference: Contracts/Transfer of Title — Installment Land Contracts, Legal Title and Equitable Title.
