Seller Financing Secrets is a video course in five modules on seller financing. It is for anyone who wants to learn how seller-financed deals work.
The modules are listed below in their original order.
Below the videos you’ll find a written guide to how seller financing works, with a worked example, so you can read the core ideas before or after you watch.
Module 1
Module 1 of the Seller Financing Secrets video course.
Module 2
Module 2 of the Seller Financing Secrets video course.
Module 3
Module 3 of the Seller Financing Secrets video course.
Module 4
Module 4 of the Seller Financing Secrets video course.
Module 5
Module 5 of the Seller Financing Secrets video course.
Seller financing in plain English
In a seller-financed sale, the seller acts as the bank. Instead of the buyer borrowing from a lender, the buyer pays the seller over time. The buyer signs a promissory note (the promise to pay) and, in most deals, a mortgage or deed of trust that makes the property security for the debt. The seller collects monthly payments, and the buyer gets the property.
You’ll also hear it called owner financing, owner carry or a carryback. The note it creates is the same kind of note that note brokers and investors buy and sell every day.
Worked example: a simple seller-financed sale
Here is an illustrative example with round numbers. A seller owns a house free and clear and agrees to sell it for $200,000. The buyer puts $20,000 down, and the seller carries the rest.
| Term | Example figure |
|---|---|
| Sale price | $200,000 |
| Down payment | $20,000 |
| Note amount | $180,000 |
| Interest rate | 7% |
| Amortization | 30 years (360 payments) |
| Monthly principal and interest | $1,197.54 |
| Balloon in year 5 (if agreed) | About $169,437 |
The seller gets $20,000 at closing and about $1,198 a month. If the note has a five-year balloon, the buyer must pay off the remaining balance at that point, usually by refinancing with a bank. If the seller later needs cash, the note can be sold to an investor for a lump sum. You can check figures like these with the note calculator.
Why buyers and sellers choose it
For the buyer
- A way to buy when a bank loan is hard to get or slow to close.
- Terms such as the down payment and rate can be negotiated with the seller.
For the seller
- More potential buyers, which can help a property sell.
- Interest income from the note, instead of one lump sum.
- The option to sell the note later if cash is needed.
Tax treatment of a seller-financed sale depends on the situation and changes over time, so sellers should ask a qualified tax professional how it applies to them.
Structuring a note that’s easy to sell later
For note brokers and investors, the best time to influence a note is when it’s created. A note that may be sold later is worth more when it has these features:
- A meaningful down payment, so the buyer has equity at stake.
- A buyer whose credit and income have been checked.
- A market-level interest rate and a regular monthly payment.
- Proper documents, recorded where required, with title insurance and proof of property insurance.
- Payments tracked by a servicer or with clear records from day one.
Rules on who may offer seller financing, and what disclosures are needed, vary by state and province and change over time. Have a qualified attorney prepare or review the documents. For more on what makes a note attractive to buyers, see the marketable mortgage note.
Questions to keep in mind as you watch
- Who benefits from each deal, and why would each side agree to it?
- How do the down payment, rate and term affect the value of the note?
- What could go wrong for the seller, and how is that risk reduced?
- If the seller wanted to sell the note, what would an investor look at first?
