Hi all, Rob here, a Louisville agent who does a lot of creative-terms deals. This is the Kentucky-specific stuff I wish more people knew before they wrote their first seller-finance deal here.

Thirty-nine point four percent. That's the share of American homeowners who own their house outright: no mortgage, no lien, nothing (Census, 2024 five-year estimates, up from 34.4% a decade earlier). Four out of every ten owner-occupied houses have no bank attached to them. The owner is the bank already. They just haven't been asked to act like one.

Here's the whole thing in one sentence: instead of the buyer getting a loan from a bank to pay the seller, the seller becomes the bank and the buyer pays the seller.

The paper is a note and a mortgage, and in Kentucky it's a mortgage, not a deed of trust. Record it. KRS 382.270 says no mortgage is valid against a purchaser for value without notice, or against creditors, until it's acknowledged and recorded. An unrecorded seller mortgage is a handshake with a stamp on it.

Land contracts. This is the part people get wrong here.

The pitch everywhere is the same: if they stop paying, you keep the house and everything they've paid. No foreclosure. Fast.

In Kentucky that is not true, and it hasn't been true since 1979. Sebastian v. Floyd, 585 S.W.2d 381: the Kentucky Supreme Court held that forfeiture clauses in installment land contracts are not enforceable as written. The seller holds a vendor's lien and is treated as an equitable mortgagee, and the remedy is a judicial sale. The Court of Appeals applied it again in Slone v. Calhoun in 2012.

So in Kentucky, a land contract gets you exactly the same remedy as a mortgage. You still foreclose. You just do it holding a worse document. And Kentucky foreclosure is judicial only: a full court process, master commissioner, two appraisers, and if it sells below two-thirds of appraised value the borrower gets a right of redemption.

Indiana went the same direction in 1973 (Skendzel v. Marshall). And Indiana recorded 31,431 land contracts between 2005 and 2024, sixth-most in the country despite being 17th in population. There is enormous demand for owner-financed entry-level housing right across the river.

Business purpose vs. consumer: 12 CFR 1026.3(a) exempts credit extended primarily for a business purpose, and the commentary says credit to buy a rental that isn't owner-occupied is business purpose regardless of units. So seller-financing a rental to an investor who won't live in it sits outside Reg Z. Seller-financing a house to somebody who's going to live in it is a completely different legal animal. When it's a consumer deal there are two doors: the three-property exclusion (fully amortizing, no balloon) and the one-property exclusion (balloon allowed). Everybody gets that backwards. Outside both, run it through a licensed loan originator. State licensing is a separate question.

Why sellers actually say yes is almost never the interest rate. It's usually the tax bill. That's a CPA conversation, not mine. Have the seller's CPA run cash vs. installment side by side.

How I use it: when I send a letter of intent, the seller gets choices. Option one is cash or hard money at a real discount with a fast close. Option two is terms: a substantially higher price, a modest down payment, and a note that pays them monthly. Same property. Same week. Same buyer. When the terms option is priced right, most sellers take it. Not because they got talked into it. Because it's the one that fits.

One caution. A lot of free-and-clear owners are older, and a terms offer is a complicated instrument with a long tail. Insist they sit down with an attorney before signing anything. If they won't, walk away from the deal.

Not legal advice. Has anyone here had a Kentucky or Indiana land contract go to judicial sale? Curious how long it actually took.