We are currently working on a 'seller financing' contract. It's been up and down but looks like it may actually take place. The seller owns the home outright (of course) and will become 'the bank' for the buyer. The buyer would not normally qualify for a mortgage with a true lender so this is the only way feasible for the buyer to become a homeowner.
The seller is asking for a substantial downpayment (about 20%) and is requiring buyer to hold the mortgage for at least 3 years or be assessed a pre-payment penalty equal to the ammount of interest the three years would have accrued. There are other stipulations in the contract but these are the main ones.
So, is this a good deal? If buyer holds the mortgage for at least three years without missing a payment, then, yes. The seller will not only get the pay-off once the buyer sells or re-finances, but the selller also gets the added bonus of the interest buyer has paid.
It's definitely a good deal for the buyer. He no longer has to pay rent; is accruing equity; gets to make any changes/upgrades to the property; and is definitely improving his credit score with timely payments.
Are there any seller financing closed contracts out there? Seller financing definitely has its risks but it can end in a win-win relationship. I'm anxious to hear your story.