Not every deal needs a bank at all — or at least not for the whole purchase price. Seller carry-back financing lets a motivated seller fund part of the deal themselves, often making possible a purchase that wouldn't otherwise pencil out.

What is seller carry-back financing?

In a seller carry-back (also called seller financing or a "carry-back note"), the seller acts as the lender for some or all of the purchase price. Instead of receiving the full amount in cash at closing, the seller accepts a promissory note secured by the property, and the buyer pays them back over time — typically with interest, on terms negotiated directly between buyer and seller.

How it's typically structured

Full seller financing (the seller carries 100% of the price) is relatively rare outside of free-and-clear properties. More commonly, a carry-back is paired with other capital:

  • Private or hard money capital covers the majority of the purchase price (often 60-80%), closing the deal quickly.
  • The seller carries the remaining balance as a second-position note, reducing the amount of outside capital the buyer needs to bring to closing.

This combination can bridge a gap that neither source would cover alone — useful when a buyer has enough for a down payment and senior financing, but not the full difference between purchase price and loan proceeds.

Illustrative example

A $500,000 property purchase is funded with a $350,000 private loan (70% LTV) and a $100,000 seller carry-back note, leaving the buyer to bring $50,000 to closing instead of $150,000.

This is a hypothetical example for illustration only — actual structures depend on what the seller and senior lender are willing to agree to.

Why sellers agree to carry a note

  • A higher sale price or faster sale than they'd get holding out for an all-cash buyer.
  • Steady interest income on the carried balance, which can beat other places they'd park the proceeds.
  • Tax timing — spreading capital gains recognition over the life of the note rather than taking it all in the year of sale, which is worth discussing with their accountant.

What to watch for

  • Due-on-sale clauses. If the seller has an existing mortgage, transferring the property can trigger their lender's right to call the loan due — this needs to be addressed before closing, not discovered after.
  • Lien position and consent. A senior lender providing the primary financing typically needs to know about and approve a subordinate carry-back note.
  • Clear, written terms. Interest rate, payment schedule, balloon date, and default remedies should all be documented the same as any other note — informal handshake terms cause problems later.

When this structure makes sense

Seller carry-back tends to show up most with motivated sellers — an owner retiring from a rental portfolio, an estate sale, or a property that's sat on the market. It's worth asking about directly when a seller seems flexible on terms, even if they haven't offered it themselves.

Getting started

If you're working a deal where the seller might carry part of the price, we can help structure the senior financing around it — sizing the private or hard money portion so the numbers work for everyone at the table.