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I have just talked to a customer who would like to buy a fairly large priced item from my shop on layaway. She will make 3 payments...2 in May, 1 in June. Can anybody out there help me with the logistics. I have put reserved by the title of the item. I would like to leave the listing showing till all 3 payments are made. I don't know how she would go about making her 3 payments to paypal or how to let etsy know it's a payment not a paid

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I am guessing that I would invoice her for the payments through pay pal, and edit the listing to adjust and show the price for the final payment.
That is a very good question. I have no idea , maybe someone knows.
You could create Reserve Listings for the Payments, and when she is ready to make payment, she purchases that Reserved Listing. This way Etsy will get their fee, and you will have on-site record of the transaction(s). You would incur two 2o-cent additional listing fees but - such is the prices of success(hahah)!

Also, be sure to protect yourself with a policy should they not fulfill the payment agreement. Of course you want your transaction to go smoothly, and likely it will, but you want to be protected in any event. How long you would hold the article should payments be delayed, and what portion would be refunded if the payments aren't fulfilled.
I would set up a listing stating that it's layaway and you will be invoicing for 3 payments. Have her purchase that up front using "other" as the method of payment. Then you can list the full price but only invoice her in segments. This also gives you back up in case she'd try to file a PayPal claim to get her money back. Without her purchasing up front you'd have nothing to show.
Thanks everyone for your help. Sometimes these things seem so daunting when you haven't done them before. Nice that someone has our backs and we're all working together to help each other. I hope to return the favor one day.
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Inactive Etsy Member 10:14pm May 11, 2012 EDT
Teresa.. I have done this several my other shop..and it's perfect. Just follow advice in the thread for their great advice..

Congrats on sale..woo hoo..
I do three separate listing for each payment. So easy for you and customer. I do this all the time.

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