Analyze any seller-financed deal. See monthly payments, balloon balance, cash flow, and how the terms compare to a conventional bank loan.
What is Seller Financing?
Seller financing (also called owner financing) is when the property seller acts as the bank. Instead of the buyer getting a traditional mortgage, the seller carries the note and the buyer makes monthly payments directly to the seller. This eliminates bank qualification requirements, speeds up closing, and often results in more flexible terms for both parties.
Why Sellers Agree to Finance
Sellers benefit from seller financing in several ways: they earn interest income on the note (often 5-8%), they can defer capital gains taxes by spreading the sale over multiple years (installment sale treatment), and they can often sell faster and at a higher price. For sellers who own properties free and clear, acting as the lender creates a passive income stream secured by real estate.
Frequently Asked Questions
What is seller financing?
The seller acts as the lender. The buyer makes monthly payments directly to the seller instead of getting a bank mortgage. Terms are negotiated between buyer and seller.
What is a typical seller financing rate?
Rates typically range from 4-8%, often below bank rates since there are no origination fees or bank overhead. The rate is fully negotiable.
What is a balloon payment?
A large lump sum due at a specific date (usually 3-7 years). Monthly payments are based on a longer amortization but the remaining balance comes due at the balloon date.
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