When we were first looking for a house, back in 1990, interest rates in our area were around 15%, give or take a fraction. Since neither of us was making great money at the time, we were looking for a fixer-upper for around $20-22K. We elected to think outside the box, rather than go through a bank or credit union. We started asking everyone we knew if they had any real estate they wanted to get rid of. Since things were a bit slumpish in our area at that time, we figured it would be a good time to explore the possibilities.

My hubby is a musician and we did a lot of trade with a couple who owned a music store in the same shopping center he worked in. One day, on a whim, I asked them if they knew of any houses that would be coming on the market. Much to my surprise, they said they had a small house they wanted to sell. They warned us up front that it had been a rental, so we didn't have really high hopes when we went to see it.

It was a mess. The former tenants had packed 6 people into a 2 bedroom house. Two of those people were still in diapers. They didn't bother to clean anything when they were evicted, so the place was truly horrid.

We talked to Cliff, the owner, and he said they'd have the place cleaned out by the next weekend, so we agreed to take another look. It's a small brick house on a corner about 2 blocks from a high school and a major artery, about 10 blocks from the highway. Decent area, not great, but not the slums either. Looked okay for a starter house if you were really into a lot of DIY fixing up, which we were.

We dickered a little, then settled on $21,000, with a down payment of $1,000 up front, and payments under $250.00/month. After a lot of numbers were crunched, we came up with a payment of $232/month for 18 years. That worked into our budget perfectly. We went to the title company and set up an escrow account, then signed a contract for deed.

There were provisions written into the contract to protect both of us. They couldn't sell the house out from under us, and if we defaulted two months in a row, the deed reverted back to them and the contract was null and void. They had access to the house, but only if they notified us first and one of us was there to let them in. We were responsible for all taxes and insurance on the house, that was built into the payment.

We knew going in that the house would require extensive remodeling just to make it livable. They graciously gave us 2 months before the first payment was due. We figured that in two months we could gut the kitchen and bathroom and get them at least livable.

It turned out to need a lot more than we thought, like a roof the first year we were there and total re-plumbing, but we were able to do a lot of that with some help from our friends. We had weekend fixer parties, pizza and beer for anyone who helped, and got it pretty well done by the end of summer, including a marathon roofing session over 4th of July weekend.

That first year, we poured over $10K into the house, but we did an awful lot of it ourselves with the help of some terrific people who'd been there, done that. We pulled up 13 layers of kitchen floor, 3 layers of roofing shingles, all the nasty old carpet (there was 2"white oak flooring underneath it!) re-plumbed and re-electriced and repainted and re-sheetrocked and re-insulated and basicallly lived in a construction zone. We also got a break.

The tax assessors were coming around just after we had gutted the bathroom and torn out the kitchen floor to find a leak. When he saw what a mess it was, he valued our property really low. It stayed that way for the first 5 years we were there, which kept our payment lower than it would end up being and saved us quite a bit on taxes.

I think he felt bad about us living in a construction zone, but I'm really grateful to him for that break.

Any way, 18 years later, we paid it off. Just last April. Right before the market really tanked. We now own it, free and clear. In that 18 years, rents rose from $300/mo to $750/mo for a comparable sized apartment. We figured it up, and even with the interest on the contract and the money we plowed into it the first year, we saved well over $10K over the life of the contract. Now all we have to pay is taxes, and they're still not all that high.

There's no hard and fast rule that says you have to go through a realtor and pay them a large chunk to do for you what you can do for yourself if you're willing to invest a little time and legwork and effort of your own. I'd be willing to bet there are a lot of home owners who'd be willing to do a contract for deed, if only you asked about it.