With a tight credit market and even tighter pockets for most potential home buyers, selling your home can be a trying task. If your home has been on the market for far too long, you should consider offering to extend a loan of sorts to your buyer, making your home one of the many owner finance homes.

The drop in the housing market and the subsequent bank crisis has made home loans harder to obtain for many would-be buyers, so owner finance homes can speed your sale process.

Advantages:

• This may help you get your full asking price for a home, as you can work with your buyer who is unable to obtain a loan elsewhere.

• Owner finance homes often get more inquiries and a faster sale than other homes.

• Receive equity plus interest. Capital gains taxes can also be deferred.

• Faster closing than traditional home loan sales.

• Property acts as collateral if payments cease, so you will not lose your investment if the buyer does not keep submitting regular payments.

Disadvantages:

• No money upfront – aside from negotiating for a down payment on the home, there is little money initially when using owner financing. Unlike a traditional loan where you get the full amount, you will have to wait until the loan repayment period is over, which will vary depending on the price of the house and how much your buyer can pay per month.

• You become a bill collector if your buyer stops sending you payments or continually makes late payments. This is especially problematic if you are depending on that money to pay off the mortgage you have on the house or other bills.

• If the buyer does stop payment, you will have to foreclose on the property. There is no bailout for individuals, so if the property is worth less than what you paid for it, you may run into problems.

• The contract terms are set in stone but if your buyer doesn’t read the entire document, he may be surprised and angry if there are details in the fine print that affect him.

To make the best of owner finance homes, have a real estate attorney draw up the agreement and use an escrow company to correctly divide the money. Have both parties read the entire contract, ask any questions you have about the terms of the contract and then give yourself at least 24 hours to think about the deal.