Casa Academy

Reviewed by Casa Academy and updated July 29, 2026 using the current DBPR checklist and Pearson VUE scheduling guidance.

Owner Financing

Owner financing, also called seller financing, occurs when the property seller extends credit to the buyer through a promissory note and mortgage or contract for deed instead of requiring full cash or bank loan proceeds at closing, spreading payments over time according to negotiated rate, term, and default remedies.

Exam context

Owner financing seller carries note. Purchase money mortgage secures buyer promise. Contract for deed transfers possession before deed. Assumption buyer takes over existing loan with approval.

Structure and documents

The buyer signs a note payable to the seller and grants a purchase money mortgage recorded behind any existing liens or as a first lien if the seller owns free and clear. Down payment, balloon dates, and interest rate are negotiable. Title insurance and escrow still protect both parties. State usury and licensing laws may limit terms.

Risks and market role

Buyers with credit gaps may qualify when banks decline. Sellers earn interest income and potentially a higher price. Default exposes the seller to foreclosure costs. Due-on-sale clauses in existing senior loans may accelerate if not paid off. Agents should recommend legal and tax review for installment sales.

Examples

  • Free-and-clear carryback

    A retired seller owns a condo outright and finances $180,000 of the $220,000 price at 6% over 10 years with a balloon, receiving monthly payments from the buyer.

  • Partial owner carry

    A buyer obtains an 80% bank loan and the seller carries a $40,000 second note at 7% for five years to bridge the down payment gap.

Keep studying

Practice owner financing questionsEnroll in pre-licensing

Related terms

  • Creative financingNontraditional purchase structures including seller carrybacks.
  • MortgageSecurity instrument securing owner-financed debt.

Related resources

Sources