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Ahhh, the elusive seller financing. The unicorn of transactions in the real estate world. You may have heard of it, know of someone who has successfully closed a deal with it, or even have done it yourself. If you haven\\u2019t or have and want to do more, we going to first explore what exactly seller financing means, identify scenarios where it works best, and uncover ways to pitch it and make it work. Ready? Let\\u2019s go!

Seller financing is when the seller finances the property for the buyer. Sometimes this is called \\u201ccarrying the note\\u201d, \\u201cholding the paper\\u201d, and even sometimes \\u201crent-to-own\\u201d, although that last term is oftentimes misused. Seller financing entails the current owner/seller letting the buyer make payments directly to him or her, rather than requiring the buyer to go out and get a loan from a bank and paying the entire purchase price upfront. As such, the seller is financing the property for the buyer, hence the term \\u201cseller financing\\u201d.

You might be thinking to yourself \\u201cWhy would a seller agree to payments rather than a lump sum?\\u201d. That\\u2019s a great question and one that many sellers ask themselves when posed with this option. Before we get into overcoming objections like this among others, let\\u2019s next look at the advantages and disadvantages for each side of a seller-financed transaction.

Advantages

Let\\u2019s start with the obvious advantages to the buyer.

1. The buyer doesn\\u2019t have to qualify for a loan with a traditional lender and go through all the processes that come with that \\u2013 providing financial statements and tax returns, loan applications, loan fees, and not to mention all the time that entire process takes.
2. The buyer can negotiate terms directly with the seller. From down payments to interest rates and amortization schedules. Try doing that with your local bank and see how far you get.
3. The buyer can more easily take title to a property in an LLC. Especially on smaller deals, banks are sometimes hesitant to loan to LLCs. Until you get to larger commercial deals with Fannie/Freddie loans, banks want to have the recourse of your name on the loan. With seller financing, you can more easily build in that non-recourse option.

There are of course advantages to the seller. You should be keenly aware of these and how to present them if you hope to convince a owner of seller financing.

1. The seller will make a return on the money they lend the buyer. Rather than taking the proceeds from a traditional sell and putting it all in, let\\u2019s say a savings account earning 0.01%, the seller could lend you the money earning 4%, 6%, or whatever interest rate that you agree to. Whatever that rate is, it\\u2019s likely much higher than what they could expect by putting that money back in the bank in a savings account, CD, etc.
2.  The seller will still get a lump sum payment in the form of a down payment.
3.  Carrying the note allows the seller to still \\u201cinvest\\u201d while being more passive. Rather than managing the property, collecting rents, and being responsible for maintenance, the seller can instead sit back and cash your mortgage checks every month, while earning a fixed rate interest on their money.
4. Tax deferral. This may be the biggest benefit to the seller of any. If the seller sells their property for all cash (assume the buyer is borrowing the purchase amount from a bank), then the seller will be responsible for paying capital gains tax (assuming they owned the property for greater than 1 year). By agreeing to seller financing, they spread their tax liability out over a greater amount of time. I highly recommend you talk with your CPA and urge the seller to do the same. Everyone\\u2019s tax situation is different. But this can often help the seller avoid a large tax liability, and that point alone should always be highlighted.
5. There are costs with selling any real estate. Agents fees, bank fees, closing costs, title'