Michael Bell
Michael Bell, Redfin CorporationPhone: (707) 548-1611
Email: [email protected]

Here's what you should know about seller financing

by Michael Bell 03/31/2025

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Seller financing is an option for buyers and sellers to work together without a traditional mortgage. Also called owner financing, this type of financing involves the seller providing funding for the home in the form of credit. 

Since sellers are often more flexible with financial requirements than banks, this can be an excellent option for a buyer with subpar credit or other financial issues.

Here is some more important information about seller financing arrangements:

How does seller financing work?

In seller financing, the seller acts as the mortgage lender rather than a bank or financial institution. There are typically fewer closing costs involved and different requirements for home appraisals.

Types of seller financing agreements

Different types of agreements are available to fit a wide range of scenarios. The most common types are:

  • Land contract.
  • Assumable mortgage.
  • Lease purchase agreement.
  • Land loan.
  • Holding a mortgage loan.

Mechanics of seller financing

In a seller financing agreement, both buyer and seller sign a promissory note with the specific terms of the loan. The buyer pays the amount back with an agreed upon amortization schedule, usually with interest. A seller financing deal often offers the short-term option of requiring a balloon payment within the first several years.

Tips to reduce the seller's risk

Just like a bank or mortgage lender, you take a risk when offering a seller financing agreement. If the buyer defaults on payment, you could be subject to serious legal fees. However, there are some steps you can take to serious legal fees. However, there are some steps you can take to reduce your risk as the lender and seller:

  • Require at least a 10% down payment.
  • Use a complete loan application just like a traditional lender would require.
  • Work with a real estate attorney & knowledgeable real estate agent for help during the process.

Is seller financing a good way to sell your home? If you've paid off your existing mortgage, it can be a great way to make a sale in a tough market. However, many sellers would rather not take the risks. Ultimately, you'll have to weigh the pros and cons in your specific situation.

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About the Author
Author

Michael Bell

In twenty five years of real estate sales and marketing experience, I have sold hundreds of properties, while developing detailed knowledge of Sonoma & Napa area communities. I am a life-long resident in the North Bay and after a full day at work, I enjoy spending time with my four children, and participating in their many school and recreational activities. 

Over the years, my clients have expressed diverse plans and dreams. I seek to truly understand and appreciate my clients' goals, focusing my efforts on realizing them. It has been fun learning more about the unique opportunities that attract people to the area such as the culinary community, the viticulture and wine industry as well as outdoor adventure tourism. It is important to me to listen to my clients, do what it takes to serve their needs and I am dedicated to treating everyone involved in a transaction both in a personal and professional manner. I work hard to anticipate and respond to the routine tasks at hand as well as the complex challenges that come up during real estate transactions while ensuring my goal to deliver you the outcome you desire.