Dorothy,

I would definitely seek the advice of a very competent real estate professional, or an attorney as what is being proposed is a very unique transaction. Here is an article on the Due On Sale Clauses that will almost certainly have been included in the promissory note of your mortgage. If you own the house free and clear, you can disregard the due on sale clause discussion.

http://en.wikipedia.org/wiki/Due-on-sale_clause

It is my opinion that contracts for deed will become more and more common as interest rates rise and otherwise solid buyers are harmed by the economy. Weigh your situation carefully though. You will want a large down payment to make it worth your while and the buyer should have a valid reason for their credit woes.

Consider the laid off engineer who lost their house because he/she couldn't find work but has now secured new employment and has a nice downpayment for you, but skip over the first time homebuyer with minimal down and bad credit because they were irresponsible in the past. Chances are they will be irresponsible again and this time you will be the bank for them.

Good Luck!!

Cameron Piper
#1 Trulia Agent in MN

I agree with Steele but just wanted to add a few things. It is more risky for you than buyer on CD. Your remedy for default would most likely be to cancel the CD and keep their down payment, if their down payment is significant that may not be an issue. Like most CD buyers they have probably have around $5,000 to put down and you may have to weigh the consequences if they destory the place. I would have a loan officer that you trust review the credit and assets of the potential buyers to give you an idea of the likelyhood of them getting financed and in what period of time.

Not knowing your situation here are the basics.

A C/D (contract for deed) is owner financing. Usually done when the owner has large amounts of equity or owns the property free and clear. The owner decides if the buyer is credit worthy and also determines the down payment. Usually a C/D is a shorter term agreement of 2-7 years. When it is over the buyer is expected to pay off the loan at which time they will get title to the property.

Now, if you have a mortgage on the property you may want to think twice about a C/D. Most loans have a point of sale clause. This means that if it appears the property has been sold to another party they could ask for the loan to be repaid then and there. Otherwise, you would have to be sure you continued to make your payments while receiving payments from your buyer.

Financing is so cheap right now I would personally not do a C/D. Let them get their own financing.

And I would be asking why they want a C/D. It does suggest problems with getting a new loan.

Ultimately it is your call. Feel free to expand on the situation so those here can make helpful comments.