Lets answer this question entirely.
Current Potential Buyer- Wants to fix it up, and flip it. First and foremost, if you or anyone fixed up this house, could you or someone else sell it for a profit in today’s market? Look at the comps in your area, unless the house you are offering to sell is going for 50% or less than the lowest comparable sell in your neighborhood. Think about this, is there a demand in your area for a newly renovated house and could it command a price that would make a profit after repaying the remaining mortgage amount. Unless the house you are selling is greatly lower in price (50% or more) than I would recommend not selling with this type of financing to a flipper & if the flipper/buyer has less than 6-8 years worth of experience. I would demand traditional financing.

The only time I would use this type of financing strategy is if I was selling some the home to someone on a fixed income, like a retirement, or pension plan, and had to stretch out the years for payment. For example the person who was buying the property couldn't afford to make a $1500 payment per month with a traditional 30yr fix, but could afford $1200 a month, over 41years. They will be paying at a higher interest rate but will be able to make the payment, and you have a steady cash flow every month, if not you get whatever cash has been paid and the house back hopefully without sections of the house torn apart.

The other thing to consider is who is signing for the loan? If it is an LLC, then you have little to no recourse of they do damage the place then default. If you get a personal guarantee and verify their personal assets are enough to cover the debt, then you have less risk.
You have to think like a bank in this. What is your risk vs. the reward? I also agree that you could probably get higher interest. Possibly 8 or 10% with a point or 2 at closing.
Ask yourself why finance through you vs. a bank? Can they qualify for a bank loan? If not, why?
On the positive side, it is a good way to move a property. If you feel that the risk involved is acceptable, you will also make a little more money than selling outright.
Make sure your lawyer looks over your mortgage docs so that you are covered.

Hi Debbie,

First off, I would make sure you are represented by a good real estate attorney who can provide the proper contracts and protection for you. I am assuming that the buyer has an issue obtaining standard financing for your home, due to credit or financial reasons. I would request a current credit report, income information, employment verification, etc. If the buyer fails to meet his obligations in paying you, you will probably have to spend money foreclosing on the property, paying back taxes, etc.

Other things to consider:

1. Are you going to replace this home with another? What is the new home going to cost you?
2. How much more can the home be worth after renovations? I suggest working with a REALTOR to help determine this.
3. Seller financing is generally more expensive than standard lender financing. 6% may be low, for the risk you are taking.
4. How long has your home been on the market? Is it priced well? What are the chances of finding another buyer in your local market?

I wish you the best,

Christopher Rich - REALTOR
William Raveis Real Estate
Your Fairfield County Connecticut Real Estate Agent

Ask yourself if they can do 20% damage! If they gut your home while fixing it up and then stop paying you, then you may be in worse shape than when you began. If you know the people, they have a good reputation for moving properties, then pull a credit report on them, and make sure you have a "due on sale" clause so when they do sell it, you get paid off. I'd go for more than 6% interest as well. They will have no closing costs, or very little, and you are the one taking the risk. If they only hold it for a short time, the higher interest rate should not be an issue.