Can I finance the sale for the buyer?

You can agree to loan part or all of the sales price to a home buyer. You may want to do this if you want to spread out your income from the sale over a number of years or if the home buyer can’t borrow enough money from a bank or commercial lender. This can be carried out in one of two ways.

The first possibility is for you to take back a mortgage on the house. The buyer signs both a promissory note (promising to repay the loan) and either a mortgage or a deed of trust (allowing you to foreclose if the buyer fails to pay). In return, you sign a deed transferring title to the buyer. The buyer holds title and can sell the house or refinance. But the buyer must keep sending you the agreed-upon payments.

The second and less popular possibility is for you to keep title to the property for as long as it takes the buyer to pay off the loan. The contract you and the buyer would sign is known by various names, including “contract for deed,” “contract of sale,” “land sale contract,” or “installment sales contract.” It works like this: The contract states that you, the seller, will keep title to the property until the buyer pays off the loan. (The buyer normally pays the loan off in a series of regular payments, similar to a standard mortgage.) After the buyer pays off the entire loan, you sign a deed transferring title to the buyer. Because you keep the title over the life of the loan, the buyer cannot sell or refinance the property until all payments are made and the title is transferred.