Econintersect: They were popular in the 1980s when mortgage rates from banks got as high as 18%. Now they are being used in increasing numbers again. The device, usually called a “seller financed mortgage,” covers any time payment by a buyer to a seller. They can be the only way to make a home sale to someone who has very poor credit. Someone who has a bankruptcy or a recent mortgage foreclosure has possibly two options in purchasing another home: (1) win the lottery or (2) make a time payment deal with the seller.From an article at Bloomberg:
Last year, 52,991 U.S. homes were purchased with various forms of owner financing, up 56 percent from 2008, said Realtors Property Resource LLC, a subsidiary of the Chicago-based National Association of Realtors, citing data collected from county-record offices. Such deals accounted for 1.5 percent of all transactions in 2010.
“Anytime the market is in this much trouble, people have to find ways to get it to function,” said Dennis Capozza, a professor of finance at the University of Michigan in Ann Arbor. Capozza has direct experience with seller financing: He purchased a friend’s foreclosed home a couple years ago and allowed him to buy it back in installments.
There are even websites that focus on the seller financed process, such as Owner Will Carry.com.