Real estate Q&A: Is seller financing a good idea?

Gary M. Singer, South Florida Sun Sentinel on Oct 8, 2026

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Q: Our house has been sitting on the market for months, and a buyer finally offered full price if we would finance the sale ourselves instead of making him get a bank loan. We own the home free and clear and like the idea of the monthly income. Is seller financing a good idea, or are we asking for trouble? — Walter

A: Seller financing can be a smart arrangement or a costly mistake, and which it becomes depends almost entirely on how carefully it is set up.

Here is how it works: Instead of the buyer borrowing from a bank, you become the lender. At closing, you deed the property to the buyer, and in return he signs a promissory note, his written promise to repay you, along with a mortgage that lets you foreclose and take the house back if he stops paying.

The danger you are fortunate to avoid is the due-on-sale clause that would be in an existing mortgage if you still had one. If you still owed money on your mortgage, selling the home, even on your own terms, would usually give your lender the right to demand that the loan be paid in full immediately.

Sellers who try to finance around an existing loan can land in real trouble when the bank finds out. Because you own the home outright, that problem does not apply to you, which is why seller financing might make sense for owners in your position.

That does not make it risk-free.

You are trading a lump sum of cash today for payments over time, so you take the same risks as an institutional lender regarding the buyer’s willingness and ability to pay.

If he stops paying, you will have to foreclose to get repaid, which takes time and money.

Protect yourself the way a bank would. Require a meaningful down payment, check the buyer’s credit and income before you agree, and make sure the note requires him to keep the property insured and taxes current.

Many sellers also set the loan to come due in a few years with a “balloon” payment, so the buyer must refinance or pay off the balance by then rather than stretching it out for decades.

This is not a handshake deal to paper yourself with a form from online. Have a real estate attorney draft the note and mortgage, run the title search and handle the recording so the sale closes properly and is treated like any other closing. The attorney can also walk you through any regulations that apply when you finance a home.

You should also check with a CPA about any potential tax ramifications.

Handled properly, seller financing can provide steady income and help you sell your house.