The Return of Seller Financing - Compete With The Banks and Win

The concept of seller financing, mostly in the form of Land Contract financing (referred to as "Contract for Deed" in some states) is making a comeback.  When residential lending dries up, land contract financing can be a beneficial alternative for both seller and buyer.

In such a transaction, the seller wins because land contract financing can make the difference between a sale and remaining endlessly stuck in the property.  And the interest earned on a contract sale can take some of the sting out of a lower sales price than the seller had hoped to receive.  Plus, there's always the happy prospect of that "balloon payment" at the end of the contract term.  There may also be tax advantages to selling under a land contract (consult your tax preparer or tax attorney).

The buyer wins too.  Qualifying is, on the whole, less problematic.  Terms are negotiable and your're negotiating with an individual, not a corporation or a loan committee. 

Sure, there's risk involved.  Unless there's something stated to the contrary in the terms of the agreement, there's typically no redemption period.  If the buyer stops paying the seller gets the property back in short order.  For the seller, one risk is that the seller may not want the property back.

I meet buyers and sellers who choose land contract financing in part because it gives them the opportunity to flip off the local bank.

Until residential lending comes back, expect to see more of such creative financing alternatives.