Installment Form Loophole
This trap appears as a wrong-answer choice in 1 active question. Spotting how it is built is the repair: read each example's “why it's attractive” before the “why it's wrong.”
Subject distribution
- Real Property1
Example wrong choices
14939_daniel-hannah-stable · REAL_PROPERTY · Choice AThe due-on-sale clause is void as an illegal restraint on alienation of the fee simple, so they may proceed.
Why it's attractive
Restraints on alienation are real — but is a due-on-sale clause actually an illegal restraint? The Garn-St. Germain Act says no for federal banks.
Why it's wrong
Restraints on alienation are real — but is a due-on-sale clause actually an illegal restraint? The Garn-St. Germain Act says no for federal banks.
14939_daniel-hannah-stable · REAL_PROPERTY · Choice BThe only effect of the due-on-sale clause is that the proposed transfer will automatically make Hannah personally liable on the debt, whether or not she specifically agrees to assume it.
Why it's attractive
Does transferring property automatically shift mortgage liability to the buyer? No — assumption requires express agreement.
Why it's wrong
Does transferring property automatically shift mortgage liability to the buyer? No — assumption requires express agreement.
14939_daniel-hannah-stable · REAL_PROPERTY · Choice DBy making the transfer in land contract form, Daniel will prevent enforcement of the due-on-sale clause if the mortgage payments are kept current.
Why it's attractive
Does keeping payments current protect against a due-on-sale clause? No — the clause is triggered by the transfer, not by default.
Why it's wrong
Does keeping payments current protect against a due-on-sale clause? No — the clause is triggered by the transfer, not by default.
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