Owner Financing Primer
If a seller is considering providing the financing to make a deal happen it is almost certain the buyer has some dings on their credit. Lots of people do. Some of the problems may be trivial, others are deal killers. It can be VERY hard to tell which is which.
With the current recession in the housing industry this is likely to be an even bigger problem than normal (whatever that is). For example, buyers frequently need owner financing as a "bridge" while they wait to get their previous home sold. In the not so distant past, that sale and the anticipated price were reasonably predictable. In those cases the buyer and seller could create owner financing with a short term balloon and both feel comfortable about paying off as soon as the property sold.
That comfortable situation no longer exists. With the drop in home prices the buyer may no longer have any hope of selling their former home at a profit. In fact, they may owe significantly more than they paid.
One of the really painful facts which people have forgotten in good times is that losses on the sale of a home are NOT deductible. Everyone knows that profits from the sale of a home are tax free which has been wonderful for years. The other side of the coin is going to be a really ugly surprise.
In my experience, people with stable jobs and credit history are extremely poor judges of a potential buyers credit. They simply do not understand or appreciate how irresponsible, and irrational "buyers" can be. Nor do they know what clues to look for when (if) they check the buyers credit report.