The Big Idea
Seller financing means you play the role the bank usually plays. Instead of Quelark going to a lender for a mortgage, you finance the sale directly. You receive a down payment in cash, plus a monthly payment from Quelark for years — with interest.
When Does This Work?
- You own the property free and clear (no existing mortgage), or you can pay off any small balance at closing.
- You don’t need a big lump sum of cash today.
- You’d rather have reliable monthly income over 10-30 years.
- You want to avoid a massive capital-gains tax hit in a single year.
How It’s Structured
- Purchase price: typically 10-20% higher than a cash offer because of the financing premium.
- Down payment: usually 5-15% of the purchase price, delivered in cash at closing.
- Interest rate: commonly 6-8% for owner-carry residential notes.
- Term: most notes amortize over 20-30 years, often with a balloon at year 5-10 (Quelark pays off the balance on that date).
- Security: a mortgage (or deed of trust) against the property, plus the promissory note itself.
Sample Deal
Property sold for $200,000:
- Down payment: $15,000 (cash at closing)
- Financed amount: $185,000
- Interest rate: 7%
- 30-year amortization with a 7-year balloon
- Monthly payment: approximately $1,230 to you
- Year-7 balloon payoff: approximately $170,000
- Total collected over 7 years: $103,320 in payments + $15,000 down + $170,000 balloon = $288,320
Versus a $170,000 cash offer today, seller financing collects $118,320 more over 7 years.
Tax Benefits (Installment-Sale Treatment)
Under IRS installment-sale rules (IRC § 453), you generally pay capital gains only as you receive principal, rather than all in the year of sale. For owners with appreciated property, this can mean:
- Staying in a lower capital-gains bracket.
- Spreading Medicare surtax exposure across multiple years.
- Avoiding being pushed into higher ordinary-income rates.
Installment-sale treatment is elective and depends on your specific circumstances. Always work with a CPA before signing.
What If Quelark Stops Paying?
Your loan is secured by the property. Standard foreclosure process applies, which means:
- The property reverts to you if Quelark defaults.
- You keep the down payment and all prior monthly payments.
- You keep any improvements Quelark made to the property.
Our track record is that we don’t default — it destroys our business — but the law gives you real protection.
Can I Sell the Note Later?
Yes. Private real-estate notes are transferable assets. After 12-24 months of seasoning, if you want a lump sum instead of continued monthly payments, you can sell the note on the secondary market. We can connect you with reputable note buyers when the time comes.