What is Seller Financing?
Seller financing, also called owner financing, is when the property seller acts as the lender instead of the buyer going through a traditional bank. The buyer makes a down payment and then pays the seller directly over time with interest, rather than applying for a mortgage. It’s a contract between two parties, not a financial institution involved.
It sounds simple, but it opens up options that traditional financing doesn’t. And in Spokane, we’re seeing it pop up more often, especially on land deals and off-market properties where buyers and sellers find creative solutions that work for both sides.
The Seller’s Perspective: Should You Offer It?
Why Sellers Offer Owner Financing
If you’re thinking about listing a property and wondering whether to allow seller financing, here are the real reasons sellers do it:
You can increase your yield. With traditional sales, you get a lump sum. With owner financing, you’re earning interest on the sale price over time—often 9-12% or higher depending on the market and risk. That adds up.
You spread out your capital gains. Instead of a tax event all in one year, an installment sale spreads the gain across multiple years. (Work with your tax advisor on this—it has real implications for your tax liability.)
You unlock a broader buyer pool. Some buyers can’t get traditional financing—either they don’t qualify with banks, or they prefer to avoid the appraisal fees, origination costs, and months-long process. Offering owner financing makes your property accessible to those buyers.
You close faster. No underwriting, no appraisal contingencies, no loan delays. In some cases, you can close in days rather than weeks.
The Risks for Sellers
Be honest with yourself: this is lending, and lending has risks.
Default risk. If the buyer stops paying, you have to foreclose. In Washington state, that’s expensive, time-consuming, and messy. You need proper legal documentation—either through an attorney or using Washington state’s standard forms (promissory note, deed of trust, or real estate contract). Don’t skip this.
Property damage. You’re relying on a buyer to maintain a property you don’t own anymore. That matters.
Washington state licensing rules. In Washington, if you’re a person (not a company) making more than 5 unsecured loans OR more than 5 residential mortgage loans in a calendar year, you need a residential mortgage lender license. Most individual sellers never hit that threshold, but it’s worth knowing. If you’re regularly offering owner financing, talk to an attorney about whether you need a license.
The Buyer’s Perspective: How to Use Seller Financing
Why Buyers Choose Seller Financing
If you’re looking to acquire property and traditional financing feels like overkill or isn’t an option, owner financing can unlock deals that otherwise wouldn’t work.
You avoid traditional loan costs. No appraisal fees, no origination fees, no months of underwriting. You negotiate terms directly with the seller.
It doesn’t count against your loan profile the same way. A seller-financed property doesn’t show up as a traditional mortgage on your credit, which matters if you’re buying multiple properties or want to maintain flexibility for future financing.
You get flexible terms. Interest-only periods, deferred down payments, amortization schedules stretched over longer periods—all negotiable. We’ve seen deals structured with lower monthly payments by amortizing over 15-20 years while the loan term is only 5-7 years (meaning you refinance or pay it off sooner, but your payments are manageable now).
You can build equity and refinance. Here’s a real Spokane example: a buyer acquired a fourplex with owner financing, 15% down, around 10% interest. The property cash-flowed from day one. After a few years of appreciation and mortgage paydown, they refinanced into a traditional loan at a lower rate. They pulled their original down payment back out and kept the property. Even with the higher interest rate upfront, the flexibility and access to the property made it work.
How Buyers Use It
Land and construction. You buy raw land on owner financing. While you hold it, you work with a construction lender to finance improvements. When the construction loan funds, the first draw pays off the seller-financed note. Clean transaction, and the builder/developer gets the land without tying up capital for years.
Flips and short-term holds. You acquire a property, rehab or improve it, and sell it quickly. Owner financing gives you fast access without loan contingencies slowing things down. You’re not paying appraisal fees and loan costs that cut into your margins.
Long-term holds and equity building. Like the fourplex example, you hold the property for cashflow and appreciation, then refinance when equity builds and rates/circumstances improve.
The Spokane Market Right Now
Owner financing shows up across all property types and price ranges in Spokane, but it’s most common in three categories: off-market deals, land transactions, and occasionally on MLS listings. Land is where we see it most—buyers often prefer the flexibility and speed of seller financing over the traditional loan process, and sellers benefit from the steady income stream and higher yield.
The typical structure we’re seeing: 15-20% down, 9-12%+ interest, 5-10 year term amortized longer to keep monthly payments manageable. Buyers we talk to are usually more sensitive to payment amount than interest rate—they care about cash flow and deal feasibility, not necessarily scoring the lowest APR.
How to Structure It Properly
Use standard forms. Washington state has model promissory notes, deeds of trust, and real estate contract forms. Use them. Or work with an attorney to draft custom terms. Do not handshake this.
Get a title company involved. Even though you’re not going through a bank, use a title company to handle the closing, ensure clear title, and record documents properly.
Have clear terms in writing. Down payment amount, interest rate, payment schedule, what happens if the buyer defaults, who pays property taxes and insurance, what maintenance is the buyer’s responsibility. Everything.
Work with professionals. For tax implications of an installment sale, talk to a CPA or tax advisor. For legal structure and protection, talk to a real estate attorney. This isn’t an area to cut corners.
The Real Takeaway
Seller financing isn’t for every property or every seller. But if you’re holding a property, want higher yield, or are selling something that traditional lenders won’t touch—it’s a powerful tool. For buyers, it can unlock access to properties and flexibility that bank financing doesn’t allow.
The key on both sides is clarity, proper documentation, and working with professionals who understand Washington state law. If it’s structured right, owner financing can be a win-win. If it’s not, it gets expensive and complicated fast.
If you’re thinking about buying or selling a property with owner financing in Spokane, or you want to explore whether it makes sense for your situation, reach out. We’ve navigated plenty of these deals, and we can help you think through the pros, cons, and structure.
Thinking about buyer or selling with owner financing in Spokane? We’ve structured plenty of these deals and can walk you through the process, the risks, and whether it makes sense for your situation. Give us a call or reach out on the site.
Residential properties have stricter licensing rules than land or commercial. Work with an attorney to understand what applies to your situation.
They’re three different legal documents with different protections and implications. A real estate attorney in Washington can explain which is right for your deal.
This is why proper documentation matters. The note should be recorded and your interest protected. Consult an attorney before signing anything.
Yes. Once you’ve built equity and have a track record with the property, traditional lenders will often refinance it. That’s when many buyers convert to a conventional loan and lower their interest rate.
Much faster than traditional financing—sometimes days. No underwriting, no appraisal contingencies. You still want proper documentation and title work, but it’s streamlined compared to a bank loan.
