Step 1: Agree on the Purchase Price
Seller financing does not eliminate the normal purchase negotiation. The parties still negotiate price, earnest money, inspections, closing dates, title, property condition, and disclosures. Then they also negotiate the financing.
Step 2: Determine Down Payment
A seller may require a meaningful cash investment. Why? Because the seller wants reduced loan exposure, evidence that the buyer has financial commitment, and more equity protecting the seller.
Step 3: Negotiate Interest Rate
Interest rate affects the buyer payment, the seller return, and the total interest over the life of the financing. The parties should ensure the rate and terms comply with applicable law.
Step 4: Determine Amortization
This answers the question: if the loan followed the payment schedule all the way through, how long would repayment take? For example, a 30-year amortization. But the note could mature sooner. That leads to the next concept.
Step 5: Determine Maturity / Balloon
Suppose the loan amortizes over 30 years but matures in 5 years. The payment is based on 30-year amortization, but the remaining balance becomes due after five years. That is a balloon structure.
The buyer's plan may be to refinance before the balloon. But future refinance is never guaranteed.
Step 6: Document the Debt
Potential documentation can include a promissory note, deed of trust, mortgage-related disclosures, servicing instructions, and escrow documents.
A Nevada attorney/title professional should determine the exact structure.
Step 7: Close Through Professional Escrow
Closing can help verify ownership, existing liens, taxes, HOA, recording, funds, and documents.
Seller financing is not a reason to skip title insurance or escrow.
Step 8: Service the Loan
The seller and buyer need a reliable method for collecting payments, recording payment history, handling escrowed taxes/insurance if applicable, year-end reporting, late payments, and payoff calculations.
Professional third-party servicing can simplify this considerably.
Step 9: Payoff
The loan may end because the buyer pays according to the term, the buyer refinances, the property is sold, or a balloon becomes due. At payoff, the seller's lien/security interest must be properly released.
Example
Price
$650,000
Buyer down payment
$150,000
Seller financing
$500,000
Assume the parties agree to lawful terms with a fixed interest rate, a monthly amortized payment, and a five-year maturity. At the end of five years, the remaining unpaid principal may become due.
That buyer must understand the future balloon before signing.
Why Servicing Matters
The parties should not rely on the plan of just paying informally every month.
“Just Venmo me every month.”
is not a servicing plan.
A real mortgage-like obligation deserves clear records.
