Is seller financing really happening?

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Dan Duenas
Lender · Member since 2026 · 33 posts · 19 votes
1w

It happens — and when it goes bad it's almost always the same story: a 3- or 5-year balloon with no exit plan lined up, and the bank says no when the balloon comes due.

The deals that work tend to share three things: the seller owns it free and clear (or close), the note is recorded properly with a real servicer collecting payments, and the buyer walks in already knowing their takeout — a DSCR refi, a sale, whatever — before the balloon date.

The deals that blow up: handshake terms, no servicing (he-said/she-said on what's been paid), insurance and taxes left to chance, or a balloon the buyer has no realistic way to pay. If a seller-financed deal can't appraise or can't qualify for bank financing, that's often WHY the seller is offering terms — price it and structure it with that in mind.

Happy to run the takeout numbers on any seller-financed deal you're looking at — especially if there's a balloon in it. — Dan

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  • Naum Raz
    Investor · Brooklyn, NY · Member since 2016 · 56 posts · 40 votes
    1w

    It happens more often than people think but still not very common. Usually, it happens with sellers that don't need money upfront.

    Also, it happens with many sophisticated sellers that understand what and how seller financing works.

    2Reply
    • Dennis Bamford
      OP
      Investor · Indianapolis · Member since 2024 · 92 posts · 49 votes
      1w

      Naum,

      Definitely is a lot easier to negotiate with a seasoned owner than a owner that has owned for a short time.

      0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    1w

    @Dennis Bamford

    -yes

    -good

    1Reply
  • Alex Rodgers
    Investor · Los Angeles, CA · Member since 2023 · 11 posts · 17 votes
    1w

    I haven't sold a property on seller finance but my latest purchase was a triplex in Clarksville Tennessee that I bought on seller finance.

    The previous owner was a flipper who had bought the property and fixed it up but with a combination of poor market timing and misjudging the demand in the area, overpriced the property and couldn't sell it for over 9 months. Finally, the seller put in the MLS description that they would be open seller financing.

    Things I was able to negotiate:

    • 10% down, 4.5% interest rate, 7 year balloon

    Things the seller was able to negotiate:

    • No inspection, I have to take the property as-is, sight unseen.

    • Ability to take the property back if payments are 30+ days late.

    • I had to pay lawyers fees to draw up the contract.

    Finding these deals is not too difficult. You can search on Zillow or Redfin for Owner Financing/Seller Financing, etc. You can also join Facebook groups for people offering properties on seller finance.

    3Reply
    • Dennis Bamford
      OP
      Investor · Indianapolis · Member since 2024 · 92 posts · 49 votes
      1w

      Alex,
      You already have a team in TN. to take on the property management and rehab?

      1Reply
    • Alex Rodgers
      Investor · Los Angeles, CA · Member since 2023 · 11 posts · 17 votes
      1w

      I have a team now, I didn't when I was acquiring the deal. I more or less came upon it by accident. Luckily, the property was recently flipped, and two out of the three units were occupied so I was not too concerned about rehab but I wouldn't have been afraid of finding a general contractor if the deal was right. If I could go back, I would have the property management and general contractor in place before trying to find a property but sometimes you can't expect these things.

      0Reply
    • Jaron WallingPro Member
      Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
      1w

      Alex, was the seller free and clear on the property before you negotiated the seller financing contract? It seems like most seller finance deals come from A; experienced investors collecting a fat DP upfront to protect them self's (you put down 10% but that 4.5% is nice!), and strong clauses to take the property back if the buyer can't perform out at balloon time, B; older investors holding debt free RE looking to slowly sell which spreads out the capital gains tax over multiple years, or C; combination of A+B. 

      I don't see other reasons to entertain the strategy.

      2Reply
    • Dennis Bamford
      OP
      Investor · Indianapolis · Member since 2024 · 92 posts · 49 votes
      1w

      @Jaron Walling we come across all kinds of situations where a owner is willing to do seller finance:
      -Passive income without managing the property
      -Their spouse passed away and they need the income

      -Capital Gains Tax (you already stated)

      -The property may not be able to pass a bank appraisal

      -May get a premium selling price

      2Reply
    • John Leland
      Specialist · I give advice - [email protected] - I focus on states where investing is profitable, reasonably safe & secure · Member since 2026 · 106 posts · 29 votes
      3d
      Quote from @Alex Rodgers:

      I haven't sold a property on seller finance but my latest purchase was a triplex in Clarksville Tennessee that I bought on seller finance.

      The previous owner was a flipper who had bought the property and fixed it up but with a combination of poor market timing and misjudging the demand in the area, overpriced the property and couldn't sell it for over 9 months. Finally, the seller put in the MLS description that they would be open seller financing.

      Things I was able to negotiate:

      • 10% down, 4.5% interest rate, 7 year balloon

      Things the seller was able to negotiate:

      • No inspection, I have to take the property as-is, sight unseen.

      • Ability to take the property back if payments are 30+ days late.

      • I had to pay lawyers fees to draw up the contract.

      Finding these deals is not too difficult. You can search on Zillow or Redfin for Owner Financing/Seller Financing, etc. You can also join Facebook groups for people offering properties on seller finance.

      Just curious, your comment "Ability to take the property back if payments are 30+ days late." caught me off guard. Usually a seller finance has to follow foreclosure laws for the state the property is located in, and Federal law mandates a 120-day waiting period before a lender can officially begin foreclosure, how did you get an attorney to write up an agreement for 30 days?

      0Reply
  • Dan Duenas
    Lender · Member since 2026 · 33 posts · 19 votes
    1w

    It happens — and when it goes bad it's almost always the same story: a 3- or 5-year balloon with no exit plan lined up, and the bank says no when the balloon comes due.

    The deals that work tend to share three things: the seller owns it free and clear (or close), the note is recorded properly with a real servicer collecting payments, and the buyer walks in already knowing their takeout — a DSCR refi, a sale, whatever — before the balloon date.

    The deals that blow up: handshake terms, no servicing (he-said/she-said on what's been paid), insurance and taxes left to chance, or a balloon the buyer has no realistic way to pay. If a seller-financed deal can't appraise or can't qualify for bank financing, that's often WHY the seller is offering terms — price it and structure it with that in mind.

    Happy to run the takeout numbers on any seller-financed deal you're looking at — especially if there's a balloon in it. — Dan

    5Reply
    • Dennis Bamford
      OP
      Investor · Indianapolis · Member since 2024 · 92 posts · 49 votes
      1w

      Dan,

      "The deals that work" structure that you laid out is the exact plan that we use when putting together an offers.
      The "HOW" you buy and "WHAT" happens at the end are the two most important aspects to figure out before you make an offer.

      0Reply
    • Quetzaly TorresPro Member
      Investor · Jacksonville, FL · Member since 2026 · 14 posts · 1 vote
      15h

      Dan, the balloon risk is something I've been thinking about quite a bit lately while negotiating a mobile home park acquisition.

      It's easy to get excited about favorable seller terms today, but the real question is what happens when that balloon comes due, especially if financing conditions or property performance aren't where you expected.

      I'm curious, when you're evaluating a seller-financed deal with a balloon, how do you stress-test the exit? Do you have a particular cushion you like to see between projected refinance proceeds and the outstanding balance?

      I'd be interested in your approach, particularly for commercial or multifamily assets where NOI can change the valuation significantly.

      Lastly, do you lend on MHP's?

      Thanks!

      0Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    1w

    They can work for buyers who can’t qualify for regular loans for some reason. I took one last year with the following terms.

    25% down, $10k over asking, no inspection, no appraisal, 7% interest with a 5 year balloon. ($580k purchase with $150k down $2860/mo payment give or take.). Gave me money to pay the realtors and still have a cushion if they stopped paying and I had to foreclose. Used a professional servicer the buyer is paying for, included default interest rates.

    It's a decent deal for me but it still doesn't excite me. To show you how even that isn't a screaming deal for me/the seller. Every "we buy notes company" that makes an offer wants to discount the balance 10-20%. A 7% interest rate with a 4 year term and a 75% LTV ratio isn't good enough to sell. Imagine if you got 10% down and charged 4%. They might offer you 70%? No thanks.

    0Reply
  • Ryan ThomsonBusiness Member
    Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
    6d

    Seller financing does happen, and this scenario sounds like a textbook case where it makes sense.

    A flipper sitting on a property for 9+ months with carrying costs piling up is motivated. That motivation is where the deal gets made. The key is figuring out what they actually need: full cash out, or just relief from the monthly payment?

    If they own it free and clear (common with flippers who bought cash), you can offer a note directly. If they have a loan on it, you're looking at a wrap-around mortgage or a subject-to structure, which adds complexity and their lender's cooperation (or at least tolerance).

    The numbers that usually make seller financing work on a stale listing:

    - Seller accepts 5-6% on the note instead of parking cash somewhere else at 4%

    - You get in with 10-15% down instead of 20-25% conventional

    - Closing is faster and cheaper (no bank underwriting)

    One thing worth checking before you get too far into negotiations: is there an existing FHA or VA loan on it? If the flipper bought with a conventional loan that's assumable, or if the previous homeowner's FHA/VA loan is still on title somehow, there may be another angle. I've seen creative deals fall apart because nobody checked what was actually on the property.

    For a flip that sat 9 months, the seller's pain is your negotiating position. Come in with a clear offer structure, a down payment that covers their equity need, and a rate that beats what they'd earn elsewhere. That's usually enough to get the conversation going.

    The Assumable Guy544 Reviews
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    1Reply
  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    4d

    Dennis, the replies here highlight why I’d look at seller financing as both a financing strategy and a tax strategy. The balloon is probably the first thing I’d stress test. Before agreeing to a 3 or 5 year balloon, I’d want a realistic refinance or sale path based on what happens if rates stay high, the property doesn’t appreciate, or the buyer’s financial situation changes.

    On the seller side, eligible gain from a qualifying installment sale can generally be recognized as payments are received, but it’s important not to assume that every component of the gain gets deferred. Depreciation recapture can have different treatment, and the interest received on the note is generally ordinary income. I’d also make sure the note is properly documented, the interest rate is appropriate, and principal and interest are clearly separated. If the deal is being structured because conventional financing isn’t available, I’d want to understand that reason before deciding whether the seller’s terms are actually attractive.

    The best seller financed deals I’ve seen are the ones where the buyer has a credible exit and the seller understands exactly what they’re receiving and when. Happy to connect!

    [email protected]941-914-7779
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    1Reply
    • Dennis Bamford
      OP
      Investor · Indianapolis · Member since 2024 · 92 posts · 49 votes
      3d

      Excellent reply, I think you made a good point about "seller's term", we also have the buyer side terms that need attention also.

      I think we are going to be hearing alot more seller financed deal are getting done.

      0Reply
  • Bobby MacikPro Member
    Member since 2023 · 29 posts · 19 votes
    1d

    Hey there,

    I am currently acting as the buyer closing on a custom land contract for a single-family home located in Portage County, Ohio.

    To protect both parties and keep everything clean, we want to use an independent third-party servicing company to handle the contract's ongoing administration. Specifically, we are looking for a reliable, low-cost escrow, title, or dedicated loan servicing company that can:

    1. Collect the monthly payments from me (the buyer).

    2. Impound and pay the annual property taxes and hazard insurance.

    3. Disburse the remaining principal and interest to the seller.

    For those of you doing seller financing or land contracts in Northeast Ohio, who do you typically use for long-term note servicing? Are there local title companies or specialized servicing agencies you’d recommend that won't break the bank on setup and monthly fees?

    Any advice or provider names would be greatly appreciated!

    1Reply
    • Lauren Sanford
      Investor · Member since 2024 · 186 posts · 64 votes
      23h

      @Bobby Macik

      Madison Management Services . We have been buying and creating notes for 16 years and discuss this on our podcast. Servicing is great to help make it easier and follow the law but its still on you if they default. Make sure you used an rmlo and Underwriter the borrower!

      JKP

      1Reply
    • Bobby MacikPro Member
      Member since 2023 · 29 posts · 19 votes
      17h

      Thanks @Lauren Sanford . I'm the buyer/borrower. Do you service Land Contracts? its a 3-year contract, and both the seller and I want to find a loan servicing company to collect my monthly payment, pay my home insurance and taxes, and then distribute the remainder to the seller. We are looking for a company asap. Can you help? Thanks!

      0Reply
    • Lauren Sanford
      Investor · Member since 2024 · 186 posts · 64 votes
      16h

      Send us a pm or Google Madison Management Services

      0Reply
  • John Leland
    Specialist · I give advice - [email protected] - I focus on states where investing is profitable, reasonably safe & secure · Member since 2026 · 106 posts · 29 votes
    17h
    Quote from @Dennis Bamford:

    Hello,

    Looking to hear from owner's that have done a seller financed deal or knows of someone that did and what was the outcome, good or bad?

    That's about all we do along with we do Wraps. Yes they work but you need to set them up correctly. It's not fly by the seat of your pants type of investing. The contracts matter, disclosures matter, escrow matters, title matters, there is a lot of detail.

    0Reply
    • Lauren Sanford
      Investor · Member since 2024 · 186 posts · 64 votes
      16h

      @John Leland

      As a note buyer and note investing podcast host around notes we see a lot of wraps. I would say 90% done wrong and 8-9% that are done correctly are never made with the idea of being able to be sold.

      0Reply
    • John Leland
      Specialist · I give advice - [email protected] - I focus on states where investing is profitable, reasonably safe & secure · Member since 2026 · 106 posts · 29 votes
      15h
      Quote from @Lauren Sanford:

      @John Leland

      As a note buyer and note investing podcast host around notes we see a lot of wraps. I would say 90% done wrong and 8-9% that are done correctly are never made with the idea of being able to be sold.

      That's likely correct. What we do is focus on profitability for the sake of our entry level investors and their goal is safe & secure income. Our more advanced investors are concentrating on appreciation along with tax write offs. Neither is versed in setting up notes for selling the note in the future. These are typically long term plays.

      0Reply
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