But consider this, $13,000 down is a good amount. First of all, I would ask for a higher interest rate. Even a bank would want more than 5% on such a small amount for such a short term. 6 or 6.5 sounds better.
If he defaults, you get the property back! I know it would be a nuisance, and cost a little in attorney fees, but financially, your best case scenairo is if he pays a year or two ( monthly payment X months paid+ $13,000) and then he quits paying and you foreclose. You keep all that money, plus get the property back to sell again!
I just closed a deal for buyers who paid 6.5% for 25 years and were happy to do it. The seller had sold the same property in 2001, collecting a $25,000 downpayment, and 9 years of payments at $1,100 per month. The buyers quit paying and he foreclosed and sold to my clients for $140,000, with $28,000 down. He made $143,000 over the 9 years. He owed back taxes that they hadn't paid, but even with that and attorney fees for foreclosing, he cleared over $130,000. AND he got to sell the house again.
Just know that if you are willing to finance, you can ask for more in price and/or interest rate. Make sure that they keep insurance ( you should be on the policy as the mortgagee) and check to make sure they are paying taxes every year. If they aren't..foreclose!
Second, you can get a copy of the credit report. landlords do it all the time. it costs around $25.00 to $30.00. generally though i would ask the buyer to go to freecreditreport.com and furnish you with a copy of all three bureaus. You could ask for scores but you really want to knwo what hsi pay history si like and why he got denied from the bank for financing.
Third, check to see what he makes a year. How long has he been at his job. Those are good indicators fo whether he will have the ability to pay. also, if the ratio of debt to his income is to high (a reaon a bank will nto finance him) you may want to walk away.
But, do NOT sign anything unless you are 100% comfortable with it....You are not obligated to sign the owner financing agreement unless you have a binding agreemetn saying you are doing this. And it does not sound like you do.
You can say no JOSE until you are confortable..... but look at a credit report unless you have an agreement to do otherwise