You've found the perfect property — good bones, solid neighborhood, ready to rent. But the owner's asking price is $20k below market, and your down payment is tight. You walk. Mistake.

That seller might be willing to finance the deal themselves. Meaning they become your lender, not a bank. No mortgage approval process, no appraisals, no 45-day waiting game. Just you, the seller, and a note.

Seller financing (also called owner financing) is one of the most underused tools in the Dayton market. And it's especially powerful for investors hitting down-payment constraints or dealing with properties that conventional lenders won't touch.

Why Sellers Say Yes

Banks are picky. A fixer-upper, a multi-unit property, or an off-market deal often doesn't qualify for traditional financing. The seller's stuck — they need to sell, but their pool of buyers shrinks to all-cash investors. Enter you.

If you offer a reasonable down payment (typically 15–30%), a fixed interest rate (3–7%, depending on market), and a clear promissory note, a seller sees cash in their pocket now and steady income for 5–10 years. Many retirees love this: better than a CD rate, and secured by real estate.

The Basic Structure

Three elements you need:

1. Promissory note — the formal IOU. Amount, interest rate, term, and monthly payment. This document is everything. Don't skip it or DIY it carelessly; get a real estate attorney (budget $300–500) to draft it.
2. Deed of trust — secures the property to the note. If you stop paying, the seller can foreclose. It goes on record like a traditional mortgage. Your attorney handles this too.
3. Title — you get the deed once you close. You own the property, subject to the seller's lien.

Terms to Negotiate

Interest rate: Market rates for seller financing run 4–7%, depending on risk and current conventional rates. Go lower and you're giving the seller a gift. Go higher and they'll push back.

Term: 5, 7, or 10 years are common. Longer terms mean smaller monthly payments; shorter terms mean higher risk for the seller (a refinance at the end).

Down payment: 20–30% is standard. Anything lower raises red flags; anything higher depletes your capital.

Balloon clause: Many seller-financed deals include a balloon — a large lump sum due at the end of the term. E.g., "Five-year term with $50k balloon due at year 5." This lets the monthly payment stay low while the seller gets a big payday later. Make sure you have a refinance plan before you commit.

Due-on-sale clause: Ask your attorney if the note includes this. It means if you sell the property, the remaining note balance is due immediately. Standard, but worth knowing.

Red Flags to Avoid

• No written note. Verbal agreements are disasters. Always get it in writing.
• No attorney. You're borrowing on real estate. Use a lawyer.
• Vague terms. "We'll work it out" later never works. Define everything upfront.
• Seller still on title. You should get the deed when you close. If the seller keeps title as collateral, you have limited leverage if things go wrong.

What to Do Next

1. This week: Ask your real estate attorney for a sample seller-financed promissory note and deed of trust. Familiarize yourself with the language.
2. Next time you see an off-market property: Ask the seller if they'd consider owner financing. Many say yes if you ask.
3. Run the numbers: Before making an offer, model the monthly payment, the balloon (if any), and your projected cash flow. Seller financing only works if the deal is solid underneath.

Seller financing flips the script from "I need bank approval" to "I need the seller's confidence." In a market like Dayton, where affordability is an asset and owner-financed deals are rare, this is your edge.

Got a seller financing question? The GDREIA creative financing subgroup digs into owner financing, lease-options, and wraparound mortgages monthly. Bring your scenarios — we solve them together.

Roslyn Harris is a real estate investor and owner of RosCole Homes, LLC. She also serves as Magazine Co-Chair for the Greater Dayton REIA.