Often, in a purchase contract, a potential buyer asks the seller to "carry" a loan for part or all of the financing. The seller's portion could be small - 5 or 10% of the sales price, or, it could be for an entire mortgage - 75-90% of a purchase price.
The risk for the seller/loan provider increases as the buyer's down payment decreases. ( The lower the down payment, the higher the risk.) In a declining market like the one we are in now, a seller should want a prospective buyer to have at least a 20% down payment before considering providing any of the financing. That is what most banks are doing now - and so should a prudent seller.
If a qualified buyer has only a small down payment, they should be obtaining an FHA loan rather than asking a seller to provide financing. If the buyer is NOT qualified to obtain an FHA or a conventional loan, it is probably a riskier situation than you would want to be involved in.
In many cases a seller is tempted to provide a portion of the financing, in order to receive a slightly higher price for their house, but in my experience in such situations, ( 32 years of local real estate practice.) the seller is at GREAT risk to lose that portion of the financing that their loan represents.
Of course, if the buyer stopped making the payments, you could foreclose, but again, in a declining market, that might not be a wise thing to do - depending on how large said loan is.
In the end, you are hopefully represented by an agent who has YOUR best interests in mind, rather than just the temptation to earn a commission check.
I hope that sufficiently addresses your question - feel free to call me if you have additional questions or concerns. 949-643-2100.

Carrying Paper or Holding Paper as it's referred to is when the Seller finances the property for the buyer. Lately, with loans being difficult to get, buyers and sellers are looking for creative way to make sales happen. Often a buyer will obtain a traditional/conventional loan and in addition, obtain seller financing in order to make the deal work. Are you looking for property in Dana Point? If I can be of any further assistance, email me at: cfleming@coldwellbanker.com.

Simply loaning your equity or your money to a buyer. You would be acting like a bank. Setting the interest rate and terns. The buyer would pay you directly each month. There’s obviously risk involved but it’s a way to create a purchase in a “tight credit market”.