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Seller financing is one of the biggest scams I see in real estate content online, and the structure itself is fine. The math on the idea is fine. But the scam lives in who does the work and who collects.
I am a REALTOR in Indianapolis. I handle investment sales for residential, plus luxury houses and have a relationship with one of the larger residential property management groups from Indy.
I don’t sell a course.
The short answer for seller financing (so you can skip the rest of this article) is the person selling the creative finance course, uses you to find off of their deals. They get paid on the front (by you buying the course) and they get paid at the end when you bring them the deal.
They no longer have to spend any time prospecting like before.
I see seller finance working better for higher-dollar-value-projects. Like adding the buyer to an existing LLC, to eliminate due-on-sale. Or have the seller carry 10% of the mortgage note (that the bank won’t cover). Rather than seller financing a $100K value-add home where the attorneys fees (TO DO IT PROPERLY) nuke any cashflow you might get from the deal.
Let’s look at the levels of creative/seller finance.
Three different things everyone calls the same thing
First, guru’s will use these names interchangeably but I’m doing you harm if we don’t distinguish between these.
- Subject-to. Title changes hands. The existing mortgage stays in the seller’s name at their old rate.
- Assumable loan. FHA, VA, or USDA only. The buyer formally takes over the loan with lender approval. The word is assumable, and about half the people saying it say “assignable.”
- True seller financing. The seller owns it free and clear and acts as the bank. No lender in the deal at all.
Almost every video you have watched is talking about the first one (subject-to) while using the third one’s (seller finance) name.
Level 1: The $700 question
How many steak dinners can you buy with $700 a month?
A $400K house at 2.75% interest could run about $1,600 a month. The same house at 6.5% could run about $2,300. The US crossed 6% mortgage interest in 2022, and the last time mortgage rates were above 6% was 2007. That is fifteen straight years of buyers sitting on a rate you cannot get at any price today.
What you will hear about seller finance is: you take over their loan instead of getting your own. You save roughly $9,000 a year, which is a down payment on the next house.
The idea is: “don’t get a new loan, use the existing loan.”
Level 2: How the seller actually gets paid
You should be skeptical here. There is no free cheese except in a mousetrap.
The seller keeps paying the bank the original payment of $1,600 a month. The buyer sends the seller $2,100. The seller spread is $500 a month. In five years a balloon comes due and the buyer refinances to pay the seller in full.
If the seller was already a rental owner, that check looks a lot like rent with none of the tenant risk attached. No vacancy. No turnover. No water heater failing at 11pm.
Here is that in plain terms: they converted $200,000 of equity into $500 a month and a promise from a stranger. Their name stays on the note.
The concern is: what if the buyer misses a payment and it lands on the seller’s credit report?
Level 3: The seventeen hour trade
This is the part I care about most, and almost nobody covers it.
The guru needs deal flow. Deal flow means: hours a day, on the phone, calling owners who might sell, (which is time the guru does not want to spend). So the guru sells you a course for $149 and tells you to make the calls.
Then you find a deal. The guru asks you two questions: Could you buy it? Probably not. Do you have access to people with money? Probably not.
OK, so bring it to me, I’ll close it, and I’ll pay you a commission!
The guru sells that course, a hypothetical seventeen times, and guru collects $2,533 up front.
Guru also collects seventeen hours a day of cold calling that he never has to make.
Guru gets paid on both ends. You get paid if.
Level 4: Due-on-sale, and the rebuttal you will hear
Every Fannie and Freddie note/mortgage has a due-on-sale clause. When title transfers, the balance can be called in full.
Garn-St. Germain (1982) lists the exceptions: death, divorce, transfer into your own living trust.
“I found a guy on TikTok” is not on the list.
The standard rebuttal: “oh, in seventeen years, I’ve only had it called twice, and both times the bank noticed because the insurance policy changed names, never the deed. Plus your local branch already sold that mortgage on the secondary market, so nobody is watching.”
Level 5: His track record expired in 2022
Look at when those seventeen years happened.
Every one of them ran through falling or flat rates. When rates are dropping, a 3% note getting paid off early is a loss to whoever holds it if rates today are selling at 2.5%. Nobody calls in a loan they want to keep. That is why the clause might have sat quiet for two decades.
If rates are 6.6% in 2026, that same 3% note is a below-market asset the servicer would be THRILLED to retire.
Do you want to be the case that updates his number to three?
Really?
Level 6: The operating agreement workaround
Investment property is usually held in a company, and every LLC has an operating agreement. Now instead of transferring the deed, you pay a fee and get added to the LLC as a member.
No deed transfer means no due-on-sale trigger.
Better than that, the operating agreement specifies how the property gets run, what condition it stays in, and what happens if either side stops performing. You would not hand a stranger your house on a handshake and hope he keeps it clean. The agreement is what keeps the whole thing out of vibes territory.
Here is the catch.
How much money are the attorneys fees?
Same attorney, same operating agreement, same note, same servicing setup. How much does the attorney charge regardless if the property being purchased is $250,000 or $8 million? If your attorney charges $15,000 to $40,000 in legal and structuring per LLC how much profit does that eat up?
On a $5M apartment building, those fees might have no effect. But on a $140K rental house, that could be over 10% of the purchase price before you have swung a hammer.
(And ask how many single family homes are even held in an LLC you could join. The answer is very few, because most of them are somebody’s personal residence)
Seller financing scales up with property cost and complexity.
Level 7: Where it earns its cost
True seller financing, where the owner has no mortgage at all, has more options behind it:
- 75/10/15. Bank carries 75% of purchase price, seller carries 10%, buyer bring 15%. This is the most legitimate case that doesn’t cause my banker friends to have heart palpitations.
- Seller takes an equity position instead of monthly payments and shares the profit plus a slice of the gain on resale.
- Payments structured quarterly, annually, or all due at sale, tied to what the property actually produces.
The requirement is: a seller who owns it free and clear (which is rare), and a deal large enough that if restructuring costs $20K, your returns are not crushed.
Recap:
You do not have to guess whether the seller finance deal in front of you is real. You have to know where to look.
- Ask who taught the person pitching you, and what it cost them. If they paid for a course, find out who buys the deals they source. That name is the actual business.
- Read the note for the due-on-sale paragraph. It is there. Then check your situation against the Garn-St. Germain exception list: death, divorce, living trust.
- Get the attorney quote in writing
This is not legal advice from me, but written from first hand experiences as a REALTOR and countless conversations, situations, and problems.
If this article was helpful and you have a property question, feel free to send me a message.
-Nolan
First published on LinkedIn, September 2, 2026. Get new articles by email on my Substack.
Nolan Lamkin, REALTOR®, CENTURY 21 Scheetz, Indianapolis. (317) 696-9545, nlamkin@c21scheetz.com. More about my work.
