How the SIS Deal Actually Works: The Players, The Wire Flow, The Paperwork

Critical distinction: read this

SIS is NOT a traditional seller-financed installment sale.

When most people hear “installment sale,” they think of the old-school version where the buyer pays the seller directly over time, like seller-financed real estate. That arrangement carries massive buyer-default risk for the seller and is NOT what the SIS does.

Question	Traditional installment sale	Structured Installment Sale (SIS)
Who owes the seller the payments?	The BUYER	The ASSIGNMENT COMPANY (funded by a fixed annuity from a highly rated life insurer)
When does the buyer pay?	Monthly to seller for 10-30 years	Full cash at closing (just like any normal sale)
If buyer defaults?	Seller stops getting paid (buyer-default risk)	N/A. The buyer already paid in full. The assignment company owes the seller, not the buyer.
Credit risk?	Depends on the buyer’s creditworthiness	Payments depend on the assignment company and the insurer behind the annuity; not FDIC insured; don’t count on guaranty association coverage
Tax treatment	§453 installment method	§453 installment method (same code section, same Form 6252 reporting)

Seller financing and a structured sale both use §453, with different risks: the buyer’s default or early payoff on one side; an open legal question, an unsecured and locked payment stream on the other. See the risks of each, side by side.

In short: the SIS keeps the §453 spread-tax benefit of the old installment sale but eliminates the buyer-default risk. The buyer wires the full sale price to escrow on closing day, same as any cash sale. Escrow splits the wire per the SIS rider: any cash carve-out goes to you, the rest goes to the assignment company, which immediately buys a fixed annuity from a highly rated life insurer. The assignment company becomes your obligor.

Before you read further

What is the tax bill on your sale going to be?

Send me the sale price and rough basis. Within one business day I'll email you the actual number and the Seller's Guide to §453. If it doesn't fit your deal, I'll tell you that plainly.

No retainer · no obligation. Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.

The 5 players in every SIS deal

An SIS is not a complicated structure once you see the players named. There are exactly five roles, and each has one specific job.

Player	Role	When they act
1. The Seller	Signs the Purchase Agreement with the SIS condition; signs the assignment addendum; receives the annuity payments for the term	Throughout
2. The Buyer	Signs the standard Purchase Agreement plus the one-page SIS rider; wires full sale price to escrow on closing day; receives title	PA signing + closing
3. The Escrow Officer	Receives buyer’s wire; splits it per the SIS rider (cash carve-out → seller; remainder → assignment company); records the deed	Closing day
4. The Assignment Company	Receives the wire from escrow; immediately buys a fixed annuity it owns from a highly rated life insurer; becomes the third-party obligor on the seller’s payment stream (the seller is its unsecured creditor)	Day 1 after closing
5. The Life Insurer	Issues the fixed annuity to the assignment company; its payments fund the seller’s monthly/annual checks for the full term per the locked schedule	For the full 5-40 year term

What each player does NOT do

Buyer doesn’t pay the seller: buyer wires to escrow as in any sale
Buyer doesn’t carry any ongoing obligation: once the wire lands, buyer is done
Escrow doesn’t handle the annuity: escrow just records the deed and splits the wire
Assignment company doesn’t hold the funds long-term: they convert cash to annuity within hours
Carrier doesn’t deal with the buyer at all: the carrier’s only relationship is with the assignment company and the seller

The wire flow on closing day

Take a $2M sale with a $400K cash carve-out and $1.6M structured. This is exactly what happens with the money:

The paperwork checklist

Compared to a "normal" California real-estate sale, an SIS adds two documents. That’s it.

Document	Required for normal sale?	Required for SIS?
CA Residential Purchase Agreement (or commercial equivalent)	YES	YES, with SIS condition added
Standard disclosures (TDS, NHD, etc.)	YES	YES, unchanged
Escrow instructions	YES	YES, with wire-split language
+ SIS Assignment Agreement (1 page)	NO	YES, added at PA signing
+ Annuity Contract (carrier-issued)	NO	YES, issued by carrier on Day 1 after closing

Day-by-day timeline (typical 45-day escrow)

Day -30 to -1 (before PA signed):Hans + escrow officer prepare the SIS structure: carrier identified, term and start date selected, cash carve-out amount fixed, addendum language drafted
Day 0 (PA signed):Buyer signs the standard Purchase Agreement plus the one-page SIS rider acknowledging the wire-split. Buyer’s timeline begins as in any sale.
Day 1-44 (escrow runs):Buyer’s loan funding, inspections, disclosures, contingency removals, all proceed normally. Escrow officer prepares wire-split instructions.
Day 45 (closing day):Buyer wires full sale price to escrow. Escrow records the deed. Wire splits: $400K to seller, $1.6M to assignment company.
Day 46 (assignment company acts):Assignment company receives the wire and immediately buys a fixed annuity from a highly rated life insurer with the $1.6M. The insurer issues the annuity contract to the assignment company, which owns it.
Day 76 (~30 days after issue):First annuity payment hits seller’s bank account ($8,800/mo for 20 years).
Day 76 to Year 20:Monthly payments continue per the locked schedule. Each year the seller files IRS Form 6252 reporting that year’s pro-rata gain recognition.

What if something goes wrong?

Buyer backs out before closing:Same as any cancelled sale. SIS is irrelevant until closing happens. Hans only gets paid if the deal closes.
Escrow falls through during contingencies:SIS addendum is voided with the rest of the PA. No fee, no obligation.
Insurer downgrade after the structure is in place:The annuity terms are locked at funding, but your payments still depend on the assignment company and on the insurer behind its annuity. You are an unsecured creditor of the assignment company, payments are not FDIC insured, and you should not count on state guaranty association coverage; it may not apply to this arrangement. That is why the insurer’s rating is checked at quote time.
Seller dies during the term:Remaining payments continue to the seller’s named beneficiaries (typically heirs), taxed under the same pro-rata gain recognition rules.
Seller wants to commute early:Not allowed. The non-commutability is what preserves the §453 treatment. That restriction is the point.

Hands-on walkthrough on your specific deal

Every deal is slightly different: carrier selection, term length, cash carve-out percentage, deferred-start structure if you don’t need income immediately. Run the calculator first, then call for the walkthrough specific to your sale.

Run the calculator → 213-414-2808

How the SIS Deal Actually Works