Skip to main content

Seller Financing in Real Estate

Marlene is a California real estate broker who has been selling property since 1989. California Real Estate License number 01056418.


A client recently asked the following question, which I was happy to answer.

Question: Do you ever come across sellers who do seller financing as an option?

Answer: Yes.

Seller Financing

Traditionally, when buyers need a loan to purchase a home, they go to a financial institution to get a loan. They make monthly payments, also known as a mortgage, to the institution that loaned them the money.

With seller financing, the buyer and the seller sign an agreement where the seller, instead of a financial institution, is the one to finance the home's purchase. The buyer then makes mortgage payments to the seller.

A seller might be willing to finance their home purchase if few buyers can purchase their home. It is a way to entice buyers to buy their home instead of someone else's home. It is a way for sellers to help buyers who might not qualify for financing through conventional methods.

Seller Financing in a Seller's Market

Currently (2021), we are in what the real estate industry calls a seller's market. A seller's market is when there is a low inventory of homes to sell. In other words, more buyers want to buy a home compared to the number of homes available to sell—this type of market answers to the theory of supply and demand. When supply is low, and demand is high, prices increase. This scenario manifests itself into a market where sellers control pricing and other negotiations in a sale.

In a seller's market, sellers need to do nothing more than place their house on the market to be sold, and it sells within a matter of a few short days.

Typically, there is an abundance of buyers seeking to purchase a home in a seller's market. On top of the supply and demand theory, buyers can obtain exceptionally low-interest rates on a mortgage through conventional means in today's market. So, in today's seller's market, it would be unlikely for a seller to offer the option of helping a buyer finance their home purchase.

Seller Financing in a Buyer's Market

When we are in a buyer's market (where there is an abundance of homes available to sell), sellers are willing to help buyers finance the purchase of their homes.

In a buyer's market, sellers will bend over backward to get their house sold, and that includes seller financing. We are not in that market right now, so it would be a rare occasion to see seller financing. But that is not to say no seller would be willing to help finance. It would just be a matter of asking them if they would be willing to consider it. And, I believe it never hurts to ask.

Different Types of Markets

Real estate is a cyclical industry. Over time, what was once a seller's market can turn into a buyer's market. As the real estate market cycles through the natural sequence of events, in other words, as the economy changes, so does the real estate market. In a seller's market, sellers are large and in charge. But, never fear, the market changes. There will come a time when it is a buyer's market, and then buyers will be large and in charge. In either market, it is always a good time to own real estate. These changes (fluctuations) make real estate a good buy, no matter what type of market it is.


Currently, interest rates are favorable for buyers, so it is good to buy right now, even if it is a seller's market. When buyers wait for it to become a buyer's market, they have many homes at their disposal. However, experience has shown me that interest rates are typically higher, resulting in a lower purchase range for qualified buyers. A buyer's market is more likely to see more options for seller financing.

My advice to buyers is to buy the home you can afford, no matter what kind of market it is. In the end, when you become the seller, hopefully, if all goes well, you will sell your home when it is advantageous to sellers.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2021 Marlene Bertrand


Marlene Bertrand (author) from USA on May 10, 2021:

Scroll to Continue

Mark, that is the best compliment, that you would keep this article for reference. Thank you very much.

Mark Tulin from Palm Springs, California on May 10, 2021:

Good info on this one. I'm going to keep this for reference.

Marlene Bertrand (author) from USA on May 05, 2021:

Hello Chitrangada! Your thoughts are absolutely on point. It is very important to do proper research first. Thank you for your feedback.

Chitrangada Sharan from New Delhi, India on May 05, 2021:

Great advice and information about the seller financing in real estate.

I believe, that the buying-selling rules are almost similar everywhere. And it keeps on fluctuating, according to the financial market. It’s important to do proper research before buying or selling, and consult an expert.

A thorough and to the point article. Very helpful information. Thank you for sharing.

Marlene Bertrand (author) from USA on May 04, 2021:

Hi Pamela, thank you. Some of the conceps of real estate can be challenging, for sure. I do try to make it easy to understand.

Marlene Bertrand (author) from USA on May 04, 2021:

Hello Devika, because the real estate market changes over a period of time, to me, it us best to be considered a long-term investment.

Marlene Bertrand (author) from USA on May 04, 2021:

MsDora, thank you for your feedback. I am glad the information is helpful.

Dora Weithers from The Caribbean on May 04, 2021:

Thanks for the information. Good real estate lesson on seller-financing. I can speak intelligently about it now.

Pamela Oglesby from Sunny Florida on May 04, 2021:

It is not to easy to buy a home right now as they sell almost as soon as they go on the market. The low interest rate is attractive. This article explains the various markets very well, Marlene.

Devika Primić from Dubrovnik, Croatia on May 04, 2021:

It is a challenge and a lot to have on one's mind when buying a house. The value is what gets most people. I know of someone who sold their expensive home and bought a cheaper one and not sure what will be in its value. I believe in buying a house that I look and later will decide what do about it in terms of sales.

Related Articles