How does a structured installment sale show up on the title report, escrow instructions and closing statement?
Barely, and that is the point. The preliminary title report does not change: a structured installment sale puts no lien, deed of trust or note against the property, because the buyer's obligation to pay part of the price later is assigned to the insurer's assignment company at closing. The grant deed is a normal grant deed and title passes in full. What does change is the paperwork around the money: an addendum to the purchase agreement, an assignment agreement, escrow instructions that wire the structured portion to the insurer, and one extra disbursement line on the seller's closing statement.
Buyer cash → Assignment Co. → fixed annuity → You, on schedule
Hans Goldstein structures installment sales for sellers and works alongside their brokers, escrow officers, CPAs and attorneys. Email hans@goldsteinco.net or call 213-414-2808.
Why does title see nothing new?
A preliminary title report shows three things: the property, who owns it, and what is recorded against it. A structured installment sale adds nothing to that list.
At closing the buyer pays the full price into escrow, the same as a cash deal. The part of the price the seller chose to receive over time is not owed by the buyer after closing. The buyer's promise to pay it is assigned to the insurer's assignment company, which takes on the payment obligation and funds it with a fixed annuity. The seller has no note from the buyer, and the buyer has nothing to secure. So there is no deed of trust to record, no lien for title to except, and no reconveyance to chase years later. That is the main difference from ordinary seller financing; see structured sale vs seller financing.
For the title officer, the order reads like any sale. The grant deed is normal, the buyer's lender (if any) gets its usual first position, and the owner's policy issues the usual way.
What changes in the purchase agreement?
An addendum to the purchase and sale agreement. Some insurers require one; it is best practice either way. It says the buyer agrees to pay part of the price in installments and agrees to assign that obligation. The buyer's total cost and closing date do not move, which is why most buyers sign it. If the agreement is already signed, the addendum is added with the buyer's consent. See can the buyer refuse?
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.
An assignment agreement. The buyer is the "assignor," and the insurer, or its assignment company, is the assignee. Signed before closing, this is the document that moves the payment obligation off the buyer and onto the assignment company. The payment schedule is written into it.
A buyer and seller representation and acknowledgment. The insurer's own form, confirming both sides understand the structure.
What goes in the escrow instructions?
One added instruction: at close, escrow wires the structured portion of the seller's proceeds to the insurer, using the insurer's wire instructions. The seller never receives those funds and then forwards them; the money goes from escrow to the insurer directly, which is part of what keeps the deferral intact (see constructive receipt).
The insurer also sends a source-of-funds form. It asks who sends the money, how and when it is sent, and who holds title to the funds before they are sent. Usually escrow is the sender, by wire, on the closing date, from the escrow company's trust account. The seller has no option to take that money as cash instead; it is committed to the insurer before closing. Filling the form in early saves a day at the end.
How the money moves at closing
What does the seller's closing statement show?
One new disbursement line for the structured sale premium paid to the insurer. The seller's cash to close is net of it. Everything else on the statement looks like a normal sale. The exact wording of the line varies by insurer and escrow company, so ask the insurer for a sample and give it to escrow with the instructions.
An illustrative seller's statement, hypothetical and rounded: a $3,000,000 sale with a $600,000 loan to pay off.
The structured line is the only one a title or escrow officer would not see on an all-cash sale.
What if the seller still has a loan on the property?
Common, especially with ag loans and older mortgages, and it works fine. A few things follow from it:
- The loan is on the title report, like any recorded deed of trust, and it has to be paid off and reconveyed at closing for the buyer to get clean title.
- Escrow pays in order: the payoff first, then closing costs and commissions, then the structured sale premium, then the seller's cash.
- Only the equity left after the payoff can be structured. On the example above, $3,000,000 less the $600,000 payoff and $180,000 of costs leaves $2,220,000 that the seller can split between the structured sale and cash.
- The payoff is a taxable year-one payment. The buyer's money pays the seller's lender at closing, so the seller has received it. The exception is a buyer who truly assumes the loan or takes the property subject to it. Then only the part of the loan above the seller's basis counts as a payment (Treas. Reg. §15a.453-1(b)(3)(i): qualifying indebtedness "assumed or taken subject to" is included "only to the extent that it exceeds the basis of the property"; IRS Publication 537, "Buyer Assumes Mortgage"). Assumptions are rare on a sale with new financing, so plan on the payoff being taxed in year one and size the cash at closing to cover that year's tax. Your CPA confirms it on your facts. More on what is taxed in year one.
What if a seller carryback note is added?
That changes title. A seller carryback note is the buyer's own loan from the seller, so it is secured by a second deed of trust that will show on title once it records, behind the buyer's lender. The buyer's lender has to consent to it. The structured portion still adds nothing to title; only the note does. Some deals use both to close a price gap: structured sale plus seller carryback.
What does escrow need, and when?
- The signed addendum to the purchase agreement
- The assignment agreement
- The buyer and seller representation and acknowledgment
- The insurer's source-of-funds form
- Government ID for the buyer and the seller
- The seller's W-9 (and W-4P where required)
- The insurer's wire instructions
Lock in the case and get these to escrow early, so the structured sale disbursement line is on the estimated closing statement the seller and both agents review, not added the morning of closing. The insurer reviews the purchase agreement before it funds, and the payment schedule is set when the case is locked in, so the paperwork has to run ahead of the closing date, not alongside it. See the full documents checklist and when to set it up.
What happens after closing?
The insurer pays the seller on the schedule chosen before closing and issues a 1099 each year for the tax return. The buyer has no further obligation, owes no payments and carries no note. The title company's file closes like any other sale. Nobody on the buyer's side is involved again.
What are the trade-offs?
Stated once. The schedule is fixed once the case is locked in, and the payments can't be accelerated, cashed out or borrowed against. They depend on the claims-paying ability of the assignment company and the insurer behind it. A loan payoff reduces what can be structured and is taxed in year one. And the documents have to be signed before closing: once escrow has paid the seller, the structured option is gone.
This is not tax, legal or escrow advice. Work with your escrow officer, CPA and attorney on your own transaction.
Have a deal in escrow? Send Hans the deal and he will send the addendum, the insurer's forms and a sample closing statement line to the escrow officer, or run the numbers yourself. Brokers: how a structured sale helps you close.
Frequently asked
Q: Does a structured installment sale show on the title report? A: No. The preliminary title report shows the property, the owner and recorded liens. A structured installment sale records nothing against the property, so the report looks the same as for a cash sale. Any existing loan of the seller shows as usual and is paid off at closing.
Q: Is there a lien on the property? A: No. The buyer's obligation to pay the structured portion is assigned to the insurer's assignment company at closing, so there is no note from the buyer and no deed of trust. The only exception is a separate seller carryback note, which is secured by a second deed of trust.
Q: What does escrow need for a structured installment sale? A: The signed addendum, the assignment agreement, the buyer and seller representation and acknowledgment, the insurer's source-of-funds form, government ID for buyer and seller, the seller's W-9 (and W-4P where required), and the insurer's wire instructions. Get them in early so the disbursement line is on the estimated closing statement.
Q: How does the money get to the insurer? A: Escrow wires the structured portion of the seller's proceeds directly to the insurer at closing, using the insurer's wire instructions. The seller never receives those funds first.
Q: What does the line on the closing statement say? A: It is a disbursement for the structured sale premium paid to the insurer, and the seller's cash is net of it. The exact wording varies, so ask the insurer for a sample to give escrow.
Q: Can the seller do a structured sale if there is a mortgage or ag loan on the property? A: Yes. Escrow pays off the loan first, then costs and commissions, then the structured sale premium, then the seller's cash. Only the equity left after the payoff can be structured, and the payoff itself is a taxable year-one payment unless the buyer truly assumes the loan.
Q: Does the buyer or the title company have anything to do after closing? A: No. The insurer pays the seller on schedule and issues a 1099 each year. The buyer and the title company are out of it.
What should you read or run next?
- Structured installment sale documents checklist
- When to set up a structured sale
- Structured sale plus seller carryback
- What is taxed in year one
- Constructive receipt
- How to bring it up with your listing agent
- All structured installment sale questions
Who wrote this?
Find out what your sale is really going to cost you in tax, and what you can do about it
No retainer. On a funded structure, the insurer pays a one-time commission of about 4% of the amount structured to the brokerage firm that places it (Hans’s share is about 2.4%; no trail). It is built into the annuity pricing, not a separate fee.
Send me the sale price and roughly what you paid. Within one business day I’ll come back with the number you’re actually looking at and whether a structured installment sale can push it down. If it can’t, I’ll say that just as plainly.
You'll also get the plain-English Seller's Guide to §453: the math, the alternatives, and the cases where it does not work.
📞 Hans Goldstein · 213-414-2808 · CA Insurance License #4273294 · Independent §453 specialist · Goldstein & Co. LLC
Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
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