Seller Financing Comps: What Terms Are Actually Getting Deals Done Right Now?

Question

Seeing more sellers open to carrying paper as rates stay sticky, but term sheets vary wildly - some want 8-10% with a 3-year balloon, others are fine at 6% amortized over 20. Curious what terms investors here are actually closing with in today's market, and how you're structuring the down payment ask when the seller has no mortgage left to pay off. Happy to compare notes on what's realistic vs. wishful thinking on both sides of the table.

James Driscoll · Answer

Terms really do vary that much right now, so what you're seeing isn't noise, it's the market. From what I'm tracking on deals that actually close, the sweet spot seems to be somewhere in the 6.5-7.5% range with 20-25 year amortization and a 5-year balloon. The 3-year balloon with 8-10% is a tough sell unless the buyer has a clear refi path or the price is discounted enough to compensate for the rate drag.

On the free-and-clear side (seller has no mortgage), the down payment conversation is almost entirely about the seller's tax situation. A seller sitting on a lot of appreciation will often want a meaningful down payment to stage their gain recognition, but sometimes they're fine with 10-15% down because a long installment note at 7% is genuinely attractive income for them. Worth asking what they plan to do with the proceeds before you anchor a number.

A few things that seem to help deals get done: a sizeable enough down payment to make the seller comfortable you're not walking away, a balloon that gives you 5 years minimum to either refi or sell, and clean documentation with a real attorney drafting the note and deed of trust. Sellers who've never done this before get nervous about the legal side, so making that process feel buttoned-up early reduces friction.

DSCR loans can work well here too if a seller financing deal stalls. They qualify on the property's rental income rather than personal income, which matters for a lot of investors who are already leveraged or self-employed. Not a replacement for a good seller carry, but worth having in your back pocket if terms fall apart.

The wishful thinking I see most often is buyers expecting 0% or sub-5% rates because "the seller has no mortgage payment to worry about." They're giving up liquidity, taking on credit risk, and managing an asset they thought they'd sold. They need to be compensated for that.

James Driscoll

Mike Grudzien · Answer

Every seller financing deal is unique.

Bill B. · Answer

My last sale was 25% down, 7% with 30 yr amort and 5yr balloon.

Buyer had money but not credit.

But that was last year and rates are SLIGHTLY higher today.

Jordan Mendler · Answer

Every deal is different but you should be able to get them to carry below market rate. The real question -- how much are you needing to put down?

Ryan Thomson · Answer

The deals I'm actually seeing close are around 6-7%, 25-year am, 5-7 year balloon. That combo keeps the payment competitive and gives the seller a reasonable exit before 10 years.

The 8-10% asks are stalling. Sellers holding out for that are either getting their price cut, extending to 30-year am to compensate, or just sitting. At 9% with a 3-year balloon, you're betting on a refinance into a market that might be exactly the same or worse. Buyers have run that math and walked.

One thing worth checking before you structure anything: does the property have an FHA or VA loan on it? Because if a seller is willing to carry paper on the equity gap anyway, a blended structure beats straight seller finance. I've done deals where the buyer assumed a 2.75% first at $380K and the seller carried the gap at 7-8%. Blended rate comes out around 3.6-3.8%, which beats any seller finance deal at 6%.

Pure seller finance at 6.5%, 25-year am, 7-year balloon is roughly what's clearing the market right now. Anything shorter than a 5-year balloon is a hard sell unless the buyer has an obvious exit strategy baked in.

Seller Financing Comps: What Terms Are Actually Getting Deals Done Right Now?

Seller Financing Comps: What Terms Are Actually Getting Deals Done Right Now?

Most Popular Reply

6 Replies