Benefits and Burdens for the Buyer When Seller Financing a Home

Posted by Security Escrow on December 11th, 2019

Seller Financing is also called owner financing, contract for deed, or seller carry back. When you use seller financing to buy a home you pay the seller monthly until the seller is paid the agreed purchase price of the home. This is called an installment sale. No bank is involved. The seller receives their money over time as you pay them.

Terms of the sale are generally negotiable. You can negotiate the sales price, down payment, interest rate, monthly payments and whether or not there is a balloon. See balloon payment under suggestions you should consider.

This is not rent to own. You own the property from day one. If you fail to pay the seller on time, pay property taxes, or keep the property insured, the seller has the right to take the property back and you will lose your down payment as if you borrowed money from a bank.


You own the home. You live in it while you pay the seller.
You can build equity through appreciation and by paying down what’s owed to the seller.
If you sell it you get to keep the difference between what you still owe the seller and what you sold the house for minus your closing costs.
You get to deduct the interest you pay the seller on your income tax return.
You get to deduct the property tax you pay on the property on your income tax return.
You can leave the home to you family.
You can sell the property at any time.


You must make payments to the seller just as you would have to if you borrowed money from a bank to buy the home. If you miss payments the seller can take the property back.
You are responsible for paying the property taxes.
You must keep the property insured.
You are responsible for the maintenance and repairs. For instance, if the roof starts to leak or the hot water heater goes out, it is your responsibility to fix or replace it. You own the home, not the seller. This is an added expense you must consider.

Suggestions You Should Consider to Protect Yourself

Use a title company and get title insurance to assure there are no undisclosed liens and that the seller has a legal right to sell the property.
Record the agreement in the county the property is located so everyone knows you own the property.
Make sure the agreement is in writing.
If your state has a standard seller financing form, use it.
Use an impartial third party like an escrow company to collect the payments and hold the release of mortgage or deed. That way you will have a true and fair accounting of your payments and you won’t have to track down the seller when you pay the home off.
If you are unsure about the value of the property, then get an appraisal.
Hire someone to do a home inspection.
If your agreement calls for a balloon payment, then make sure the property, and you, can be financed in the future by a bank. A balloon payment is where you must pay the seller a lump sum of money in the future in order to pay the property off. If you can’t pay the balloon, then you will lose the property and any equity you have built up. If you or the property cannot be financed in the future, then don’t enter in to an agreement that requires you to make a balloon payment.
Use a REALTOR® and/or attorney.

1,469 Transactions

Posted by Security Escrow on March 15th, 2016

In 2015, 1,469 properties sold using Owner Financing in Bernalillo, Valencia, and Sandoval counties. To put that into perspective, GAAR reported that there were 10,928 attached and detached homes sold in 2015 in the same counties.

Have you spoken to your Buyers and Sellers about Owner Financing? It’s also known as Seller financing or Seller Carry Back. It’s the other way to buy and sell property.

GAAR + Security Escrow Scholarship

Posted by Security Escrow on February 11th, 2016


Security Escrow Corporation, in conjunction with the Greater Albuquerque Association of REALTORS®, established a real estate school scholarship fund. The $1,000 scholarship is awarded each year to pay for required education classes and the state exam to become a real estate licensee. The recipient must be 20 to 24 years old and a relative of a REALTOR® member of GAAR. Applicants must submit an essay (2-3 paragraphs) that answers the question “Why would a career in real estate be a good fit for you?”

Applications must be submitted to GAAR by 5:00 p.m. on Friday, February 26, 2015.
Click HERE to download the application!

The scholarship will be presented by Security Escrow at the GAAR Annual Awards Gala. The scholarship covers the winner’s cost of tuition for pre-licensing education and exam fees. The check will be made payable to the real estate school of the recipient’s choice.

Seller Financing Update

Posted by Security Escrow on August 7th, 2014

The number of Real Estate transactions closed using Seller Financing in the first half of 2014 compared to 2013 increased by 13%. In the counties of Bernalillo, Sandoval, and Valencia there were 792 seller financed transactions in 2014 compared to 688 in 2013.  Why? I can only guess that it is due to tighter credit, higher FHA fees, and Realtors doing a good job of educating buyers and sellers about Seller Financing. We only do research in these three counties, but we escrow Real Estate Contracts from all over the state and those numbers are also up.

By the way, more consumers chose Security Escrow to be their Escrow Company over other escrow companies. Contact us today. 

Upcoming REC Class

Posted by Security Escrow on June 19th, 2013

Pratical Applications of Real Estate Contracts
Friday, June 21, 2013 9:00am – 1:00pm
Santa Fe Board of Realtors, 510 N. Guadalupe, Suite E, Santa Fe, NM 87501

Please note: You do not have to be a member of the Santa Fe Board of Realtors to attend this class. All are welcome.

Learn about this frequently used creative financing tool in Real Estate. This course answers the questions most frequently asked by your buyers and sellers about real estate contracts and owner financing. Receive step-by-step instructions from listing, to offer, to title company, to escrow company, to end of contract. Learn how to structure a real estate contract to maximize its value for future sales. Registration required.

Members: $61.00
Non-Members: $71.00
4 CE Credit Hours
[email protected]
(505) 982-8385