How to Structure Seller Financing

There are a number of reasons why a seller will consider providing you  with seller financing when selling their homes:

  • Sell as-is – Most owners do not want to endure a home inspection and then have to use a contractor to make repairs to their houses before selling.
  • Price – With seller financing we can often offer a higher price then our typical cash offer. All sellers like the idea of getting maximum value when selling their homes.
  • No listing, no open house, no Realtor – The fast and easy way for a seller to sell a house without the intrusion of strangers walking through their home.
  • Return on investment – Most homeowners who are in a position to sell with seller financing will be putting their capital in the bank. Have you checked what a CD is paying? Less then 1%! And with seller financing they can get several times better returns.

Each of these is a specific benefit to the seller of the house and you can highlight them when discussing their house, their options and what is best for them when they sell their house.

Let’s assume that the seller of this 3 bedroom, 2 bath home is stuck on getting $110,000.

seller financing real estate deals

Door #1: 50/50 Seller Financing – Half Now and Half in 72 Months

This offer gives the seller $55,000 at closing then the final payment of $55,000 in five years. As the buyer, what did you accomplish with this structure? I hope you see that it is equivalent to a zero interest loan for the next six years. This offer can appeal to sellers who need some money now, but don’t really need all of the money right now. Sellers feel comfortable doing this deal because the down payment is significant, which minimizes their risk.

In my market, this home will rent for $1,000 per month. This offer super sizes your cash flow for six years because you have no monthly debt service due each month.

How would you like to buy houses without needing to make a monthly mortgage payment?

Door #2: Free and Clear in 100 Months with No Interest

Sometimes you’ll encounter a seller stuck on a particular price and stuck on needing a down payment. The down payment helps them feel more comfortable about providing financing because it reduces their risk.

When a seller requires a higher price then I want to pay and when they insist on a down payment to get financing, I offer zero interest. This can be accomplished by focusing on the down payment and the monthly payment without talking about interest at all.

For instance, if the seller wants $77,000 for the house, you could offer them a $7,000 down payment and 100 payments of $700 per month. The home rents for $1,000 per month, which will provide cash flow against your $700 monthly payment, but the real beauty of this offer is that it is a 100% amortizing loan and in 100 months it is free and clear.

Door #3: No Payments For 6 Months

If your seller insists on a fair interest rate and a down payment, you can negotiate some other terms.

Wouldn’t it be nice to have no mortgage payments for the first six months that you own a house? Why not negotiate that right into the purchase of the home with seller financing?

If the seller insists on a large down payment, maybe you can just pre-pay the first six mortgage payments to get him some cash at closing and then enjoy having no payments for the next six months.

The seller will like the idea of getting paid the first six payments in advance, and you’ll enjoy not having any monthly payments while you fix up the house and get it rented.

Door #4:  Take the Winter Off payments With Your Vacation Rental

If you are considering buying a vacation home, why not find a seller to finance it for you with terms that work best for you? Depending on the location of the vacation home, it can be difficult to keep it occupied in the middle of winter.  If that is true for your vacation home, why not negotiate that into your deal?

Ask the seller if you can skip payments every year in January since it will be difficult to rent in the middle of winter.

Think outside the box real estate

Real Estate Investors Are “Problem Solvers”

When presenting an offer to buy a house, always remember the seller has a problem (the house) and you have a solution (an offer). Think outside the box of just a low-ball cash offer and learn to present multiple offers that focus on what the seller needs (typically higher price) and what you need as an investor (more cash flow).

Want to accelerate your cash flow?    Click here

What are your thoughts and experiences with seller financing?

Leave me your comments below!

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  1. Thanks for the read…
    These are interesting strategies on how to acquire properties..
    I personal like door 1 and 2. The cash flow is continually flowing while knocking down the payments..

  2. Hi Jim,

    Just curious, what are you doing different with your seller financing deals that is getting around the new Dodd Frank act?


    • Jim Ingersoll says:


      Great question.

      Dodd-Frank applies on the exit, if we were to resell the house to an owner occupied with seller financing (instead of renting to a tenant).

      When we make acquisitions, as investors, it will not apply which is good news for using seller financing to buy your houses.


  3. Steve Burton says:

    I have a a couple that has been renting a house from me for around 8 years now and they want to buy a house next year and are interested in buying the one they live in now. Would owner financing be a good idea? What would be the pitfalls? I also have a mortgage on the house now.

    • Jim Ingersoll says:

      Hi Steve

      Thanks for your comments. The challenge you will have is your underlying mortgage. Without that in place, your exit strategy would be fantastic, but with that in the way it can create additional risk. You may want to offer them a lease with option to buy or do a contract sale arrangement like Contract for Deed.


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