Seller Financing

Definition

Seller financing is a structure where the seller acts as the lender — the buyer signs a promissory note to the seller, and pays the seller directly over time. The seller may finance the full purchase price (true seller carry) or fund a second-position note junior to a bank's first mortgage (wraparound or piggyback). Seller financing is most common on small-scale deals where the seller has no outstanding mortgage (free and clear) and is motivated to defer capital gains tax or generate ongoing income. Rates and terms are negotiable — operators often secure 5–7% rates with 5–10 year balloons.

Worked example

Seller owns property free and clear, wants $300,000. Buyer offers $300,000 with 20% down ($60,000) and seller financing for $240,000 at 6% interest, interest-only, 5-year balloon. Monthly payment = $1,200. Seller earns $14,400/yr in interest income for 5 years; buyer owes a $240,000 balloon at year 5.

How DealIntel uses it

DealIntel models seller financing as one of four financing scenarios on every deal when the property is owned free and clear (verifiable in public records). It often outperforms hard money on rate and points but adds balloon-payoff risk that the kill list separately tracks.

Related terms

• Hard Money LoanShort-term, asset-collateralized real estate financing from a private lender — fast to close, higher-cost.
• Debt-Service Coverage Ratio Loan · DSCRAn investment property loan qualified on the property's rental income rather than the borrower's W-2 income.
• Subject-To Financing · Sub-ToA creative financing structure where the buyer takes ownership but the seller's existing mortgage stays in place.

DealIntel's underwriting team builds and maintains the platform's six-strategy engine, 25-point kill list, and Monte-Carlo financial model. Every piece of long-form content on dealintel.io is reviewed by an underwriter with direct experience scoring residential investment deals.