Seller Finance Questions

Member since 2025 · 1 post · 0 votes

I am hoping to start my investing journey soon and doing research on different ways to acquire a property. I am struggling to find the difference between a traditional mortgage and seller finance. I heard seller finance is a way to get a property with little to no money upfront. I could come up with cash for a down payment, but what are the main pros and cons of seller finance for buying a property?

My goal is to buy a multifamily and house hack and self manage. I'm not fully prepared for that step yet which is why I'm looking into different ways to acquire.

Why would an investor want to front the money for an investment property for someone like myself?

What could make a deal more enticing to an investor to front money for me?

What are the benefits for using seller finance in this case against a traditional mortgage?

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Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

11mo

@Jourdan Schmidt

seller finance means there is a fully paid off property - no mortgages, liens, or HELOCs - and the seller, for whatever reason, may not want all of the proceeds up front. so they're the bank. they get monthly payments from you, the buyer, just like the bank would. the payments consist of principal and interest and are paid out according to whatever terms you agree to.

seller finance deals are out there, but very tough to find - and they generally don't just sit on the MLS ripe for the taking. if you're looking to house hack, just use a mortgage. talk to lenders about lower down payment options if you're not doing that already. trying to find a house hack you can seller finance isn't impossible but is going to severely limit you in terms of the total available inventory.

hope this helps

happy to answer any more questions you have

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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
11mo
@Jourdan Schmidt
seller finance means there is a fully paid off property - no mortgages, liens, or HELOCs - and the seller, for whatever reason, may not want all of the proceeds up front. so they're the bank. they get monthly payments from you, the buyer, just like the bank would. the payments consist of principal and interest and are paid out according to whatever terms you agree to.
seller finance deals are out there, but very tough to find - and they generally don't just sit on the MLS ripe for the taking. if you're looking to house hack, just use a mortgage. talk to lenders about lower down payment options if you're not doing that already. trying to find a house hack you can seller finance isn't impossible but is going to severely limit you in terms of the total available inventory.
hope this helps
happy to answer any more questions you have
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Aaron ZimmermanBusiness Member
Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
11mo
Tax benefits mainly. The seller is able to defer out their capital gain over several years as opposed to taking the gain all in the first year. Please note that depreciation recapture on the building that's sold will need to be picked up in year one on their tax return

Also - it's beneficial for sellers looking for an income stream as opposed to having one lump sum of cash.
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Kate Nixon Taylor
Lender · Cary, NC · Member since 2021 · 122 posts · 29 votes
11mo
Usually people use seller financing when their credit score doesn't qualify for a traditional mortgage. You need to be careful and make sure you have an attorney who understands seller financing to represent you in the transaction.
If you qualify for a traditional mortgage, I would recommend going that route. If you are a first-time homebuyer, you can put as little as 3% down (depending on credit score/income/etc.) on conventional financing which is even less than with FHA.
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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
11mo
If you and the property qualify for traditional financing that should be far and away the best financing possible.
I truly doubt you’ll find a seller financing deal with 30 years fixed interest rate lower than a bank. Usually the property has problems and traditional lending isn’t possible, or they want more than it will appraise for, so the seller is desperate. Or the buyer has bad/no credit and is desperate.
The last seller financing I played the bank is as follows.
I was getting zero offers, the buyer agreed to waive all contingencies, (appraisal and inspections.), paid $10k over asking ($590k) and put down $150k. The terms were 7% interest amortized for 30 years with a 5 year balloon. (The minimum for owner occupied.). I still didn’t want to do it but I was getting zero interest, didn’t have a use for the money, got $10k over asking and probably saved $10k in concessions for repairs/closing costs, whatever. I’m having it serviced by US loan in Nevada and 8 months in I get check like clockwork. I’m getting a good return but I still can’t wait to have my money and be done with it. I have zero interest in foreclosing on a pair of retired seniors when they can’t refinance in 5 years.
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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
11mo
I think of seller finance as another 'tool' that you can use to close on a purchase.

You can provide the seller(if he has anough equity) the option to purchase the property with a mortgage(with the bank) or to offer seller financing where the seller can get additional monthly income via interest.

An example would be on a house where the seller is asking for $400,000

Offer 1 - I can offer you $350,000 for the house with bank financing or I can offer you $380,000 if you allow seller financing.

The benefits of seller financing can be that you can potentially ask for a better interest rate than you would get with a bank. You may not have to pay fees to a bank, etc.

Best of luck!
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