Back to Basics, Part II: Why Carry a Note?

As a Seller, Why should I carry a Note?

Selling a home with Seller Financing (Carrying the Note) can yield substantial benefits for the Seller. Here’s how:

1. By offering Seller Financing, the seller may increase the pool of potential Buyers looking at their home and not competing homes for sale.

2. The Seller, in some cases, can ask a higher purchase price.

3. The Seller’s risk is mitigated by the collateral securing the Note (most often the home for sale). (Food for thought: If the Seller won't accept the subject home as collateral, why should the Buyer consider purchasing??)

4. The monthly payments received, often far exceed the returns offered by bank CD’s, Savings/Checking accounts.

5. Capital gain taxes (if applicable) are paid as payments are received and not one lump sum.


In the following examples, the Seller wants to sell their home and also receive a $750.00 monthly payment to supplement their other income.

A. Bank (Traditional or all cash transaction)
$100,000.00 capital gain/nest egg harvested
$15,000.00 lost to taxes
$85,000.00 put into bank @ 5% interest
$750.00 / month P & I available for 154 Mos.
- Their monthly income stream runs out just over 12½ years from sale.*(**)

B. Note (100% Seller financed)
$100,000.00 capital gain/nest egg harvested
$0.00 lost to taxes
$100,000.00 purchase money note @ 7.5% interest
$750.00 / month P & I available for 288 Mos.
- Their monthly income continues for a total of 24 years*(**)

* Monthly payments can go to Seller, Seller’s heirs, favorite charity, or any designated party.
** Each scenario did not take into consideration down payment funds or accelerated payoff terms.

Ask yourself as a Seller, "All else being the same, would you rather have a 5% return for 12 1/2 years or 7.5% return for 24 years?"