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.
Matt Abadi is the founder of DealIntel. He leads the development of the platform's six-strategy underwriting engine, 25-point Kill List, and Monte-Carlo financial model — the institutional analysis stack DealIntel applies to every fix and flip deal. DealIntel was founded in 2025 with the central thesis that knowing when not to invest is the most valuable number on the page.