The owners of real estate, particularly of subdivision property, are frequently in doubt as to the best method of selling, and especially as to the relative advantages of selling under mortgages and under contracts, and the legal aspect of this question should be discussed with the owners' attorneys. The best attorneys, however, sometimes fail to realize the practical conditions. The main difference between a mortgage and a contract is that, in the case of a mortgage, the purchaser obligates himself to make certain payments at certain times, and gives his note or notes to that effect. Should he fail to comply with these conditions, proceedings may be brought against him; and if he continues in his failure to make payments, judgment against him will probably be secured. The value of this judgment depends entirely upon the financial standing of the purchaser, and, in the case of subdivision business, the responsibility of many of the purchasers is so doubtful that a judgment is of little or no value.
On the other hand, under many forms of contract the purchaser is not obligated to continue the payments. In other words, if he fails to comply with the conditions of the contract, he loses what he has put into the property, but the vendor cannot obtain a judgment against him or in any way compel him to pay the balance.
Under these conditions, it is obvious that it is much easier for a sales department to handle a sale of property under contract than under mortgage, although such institutions as trust companies, or others lending moneys on security, have a strong preference for mortgages, based of course upon the personal obligation carried by the mortgage.