What it actually is
You sell the house and, instead of a bank lending the buyer the money, you do.
A price is agreed — higher than cash, because you are being paid over time — along with a down payment. You then carry the rest as a loan to the buyer, written up in a promissory note and secured by a deed of trust or mortgage on the property, exactly the way a bank would do it, minus the hold music. The buyer makes you monthly payments with interest. When the note is paid off, the lien is released. Until then, the house itself is your collateral.
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The headaches it removes
Trading one big check for a bigger total, paid as income.
A lump sum is lovely until it lands in the same tax year all at once, or sits in a savings account earning less than the house did. Seller financing turns the sale into monthly income with interest, spreads the proceeds across years, and often nets a materially higher total than any cash buyer will pay. Plenty of sellers treat it as the pension the bank never got around to offering them. Talk to your CPA about the tax side; CPAs love this stuff, and they will love you for asking.
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How you are protected
You are the lender now. Lenders get security, not promises.
The note and deed of trust are recorded with the county. If the payments stopped, you would have the same remedy any bank has: take the property back. Sensible seller-financed deals also route payments through a licensed loan servicer so you get statements instead of texts, keep the property insured with you named on the policy, and spell out — in the paperwork your attorney reads before you sign — the rate, the payments, the length, and what happens if the buyer sells early. If a deal is missing those, it is missing the point.
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The honest tradeoff
More money, later. Less money, now. Pick your poison; both are legal.
You do not walk away with the whole price on day one, and your money stays tied to a house you no longer live in until the note is paid off. If you need every dollar this month, cash is the better tool. If the existing mortgage is large, seller finance may not fit at all — that is what a mortgage takeover or a hybrid is for.
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Who it fits
Owners with equity who would rather have income than a pile.
Retirees, long-time landlords, people whose house is paid off or close to it, families spreading a large gain across several tax years, and anyone who likes the sound of a check that arrives every month secured by real property. If that is you, ask for the seller-finance version and let your advisors pick it apart. They will enjoy themselves.
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