Seller Finance basics

How it works

Title transfers to the buyer. The seller takes a promissory note and a deed of trust. The buyer pays the seller monthly per agreed terms — interest rate, amortization, balloon date. No bank involved.

Best for free and clear properties

Seller finance works cleanest when there's no underlying mortgage. With a mortgage in place, you're either doing SubTo or wrap, both of which are more complex. Free and clear keeps the structure simple.

Standard terms to negotiate

Every seller finance deal has four levers. Move them around to make the numbers work for both sides.

• Down payment — typically 5-15% of purchase price
• Interest rate — 4-8% depending on market and seller appetite
• Amortization — usually 30 years to keep payments low
• Balloon — 5, 7, or 10 years to give the seller a payoff date

When seller finance beats cash

Sellers who own free and clear often prefer monthly income over a lump sum, especially if they're retired and worried about reinvesting at market rates. Pitch them the math: a $400k cash sale taxed at capital gains versus $2,500/month of income for 30 years.

Why investors love it

Seller finance lets you control properties with minimal cash down and lock in rates the bank won't give you. Compared to commercial loans at today's rates, a 5-6% seller-financed note is a gift.

Seller finance means the seller acts as the bank. The buyer makes monthly payments directly to the seller over an agreed term. It's the cleanest creative path when the property is owned free and clear.