Definitions of Terms

Continuing investmentPayments that the buyer is contractually required to pay on its total debt for the purchase price of the property.
Cost recovery methodA method which defers the recognition of gross profit on a real estate sale until the seller recovers the cost of the property sold.
Deposit methodA method which records payments by the buyer as deposits rather than a sale. The seller continues to report the asset and related debt on the balance sheet until the contract is canceled or until the sale has been achieved.
First mortgage (primary debt)The senior debt the seller has on the property at the time the buyer purchases the property. A first mortgage lender (mortgagee) has foreclosure rights superior to those of second (or junior) mortgage lenders (i.e., proceeds from sale of the foreclosed property are used first to repay the first mortgage lender in full with only the remainder available to satisfy the junior lenders' balances).
Full accrual methodA method that recognizes all profit from a real estate sale at the time of sale.
Initial investmentThe sales value received by the seller at the time of sale. It includes a cash down payment, buyer's notes supported by an irrevocable letter of credit, and payments by the buyer to third parties to reduce or eliminate the seller's indebtedness on the property.
Installment methodA method that recognizes revenue on the basis of payments made by the buyer on debt owed to the seller and payments by the buyer to the holder ...

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