Seller Financing - Pitfall or Potential?

[Scott Minton]

I'm very new to real estate investing and with my very first property (purchased at Oklahoma County tax lien resale), I made a big mistake and ended up with a vacant property that needs work, just to become marketable.  That's a long and slightly embarrassing story, so I'll get to the point.  The land assesses for $12,000.  I paid $10,200 and am likely going to need to hire an attorney to file quiet title, which will be $2500-$3500.  The land is in a C neighborhood area, but for the most part, not a bad area.  Houses in the neighborhood average $55,000-$65,000.  Trying not to let my mistake get the better of me, I'm trying to sell the land and simply recoup most of what I have into it.  I've had a couple people express interest in the land, but so far, none have wanted to pay $15,000, which is what I'm currently asking.  I've only had a sign in the yard for a couple weeks, so hopefully will still have others ask about it.  However, I had a caller this evening who asked if I would seller finance the property.  Again, there's no home on the lot.  He said he would eventually like to build something there.  Since I have no experience in seller financing, I told him I would need to think about it.  He said he would be willing to pay 10% down.  We didn't talk about any other terms.  I didn't get any suspicious gut-feeling from the conversation, which is why I'm now considering it and trying to do some research first.  It's not a lot of money, but I'd rather not have it tied up in this property.  However, as there are no new houses in this neighborhood (everything else is about 25-45 years old) and there are several other vacant lots (although most are in much better shape than mine) if I have an interested party, why shouldn't I consider it?  Other than having the cash tied up for a few years, what are the pitfalls and dangers?  What are the benefits?  What should my terms be?  Is there an easy DIY contract for this or will I need to hire an attorney or possibly just use a closing company to create the contract?  Thank you for reading through and giving your feedback.  One of these days, when I'm on the BP Podcast, I'll have a great story to tell about when I got started!  /sigh

[Lee Haskins]

I just sat down with an attorney 3 days ago to go through legalities and risk associated with seller financing and lease options(in Oklahoma/County). According to the attorney, regardless of what direction you choose to sell, lease option or seller financing, if the end buyer challenges the equitable interest in the property it will be handled as a foreclosure rather than an eviction. 

Basically he said when pursuing these options, it comes down to your risk factor and what you are comfortable with, if any issues do come from it. If you choose to go the route of seller financing, I would highly recommend having a local attorney draft your contracts and do them through your LLC versus your personal name.