Home Sellers Become Lenders to Poor-Credit Buyers

This is nothing new.  In the pre-bubble days it was very common for seller to carry back a loan to close a sale.

Sue and Douglas Reed knew no bank would give them a mortgage -- not with a bankruptcy and two foreclosures fresh in their credit history.

They turned to Hilarie Walters, whose childhood home on 15 acres (6 hectares) in Marshall, Michigan, had been on the market since 2009. The unemployed single mother of twins agreed in December to sell the property to the Reeds for $105,000. She also consented to a risky payment plan that in effect makes her the couple’s mortgage lender.

Financing provided by home sellers, popular in the 1980s when mortgage rates reached 18 percent, is making a comeback in markets such as Michigan that have been hit hard by foreclosures and where tightening lending standards and years of economic distress have drained the pool of creditworthy buyers. For a small but growing number of people, it’s the only way to get a deal done.

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