What are the Alternatives?
If you want to buy or sell when it is very difficult to find new financing, the alternatives are rent,short sale or foreclosure. Here's how it looks from a Seller's or Buyer's perspective:
For the SellerThe Seller's primary alternative is to lease the property. The problems with leasing are many. We call them the 3 M's - Maintenance, Management and Move-outs. With a Contract for Deed, the Buyer is responsible for all maintenance - no more 3AM calls about the toilet running. There is no need to pay a management company to coordinate payments, look for a new tenant every year and collect rent. A Contract for Deed Buyer has an ownership mentality and a down payment so he is less likely to move out and leave you hanging.
If the Seller is facing a foreclosure or short sale, either will destroy his credit. Offering a Contract for Deed greatly increases the potential pool of Buyers, keeps the loan current and buys time for the economic situation to improve.
Maybe the seller doesn't qualify for a short sale because he has a good job and money-in-the-bank. If the seller is an investor, or hasn't lived in the house for 2 of the last 5 years, he could get a 1099 for the short amount and face a huge IRS tax bill. The Contract for Deed keeps the loan current until conditions improve.