Selling Your Home With Seller Financing: How You Can Drastically INCREASE SALES/PROFITS!

Forget everything you thought you knew about selling real estate – this game-changing episode reveals how savvy property owners are earning 30-45% more by becoming the bank.

Drawing from 17 years of experience and over 700 seller-financed deals, Stephan breaks down the extraordinary financial advantages that most sellers completely miss. Through a compelling real-world example, he demonstrates how a $460,000 property can generate $600,000+ through seller financing with minimal risk and maximum flexibility.

The numbers don't lie: with a standard 20% down payment and 5% interest rate over a five-year term, sellers can pocket an additional $140,000 compared to traditional sales methods. Better still, the monthly interest payments create immediate cash flow while the tax benefits allow you to defer and potentially minimize capital gains liability.

Perhaps most surprising is how buyer default scenarios actually benefit the seller. Far from a risk, defaults can be highly profitable – you keep the substantial down payment, collect interest for the time they owned it, then regain the property to sell again or keep for yourself.

In today's challenging interest rate environment, seller financing creates the perfect win-win. Buyers get more affordable financing than banks offer, while sellers command premium prices and create passive income streams from assets they already understand intimately.

Ready to transform your property sale into a wealth-building opportunity? Whether you're selling a primary residence, investment property, or commercial real estate, this episode provides the blueprint to maximize your returns while helping buyers achieve their real estate goals.

Subscribe now and leave a comment about what seller financing topics you'd like Stephan to cover in future episodes – your question might inspire the next podcast!

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Transcript

Welcome and Episode Introduction

Speaker 1 0:00

All right , guys . Thank you so much and welcome . This is Stephan Piscano with the Stephan Piscano Podcast in the Real Estate Networking Group . Thank you , guys . As always , so much for joining us Today .

Speaker 1 0:11

We've got a special episode that's probably one of the most requested episodes that I've ever been asked to do . It's one we've been thinking about doing for years and that is why should sellers use seller financing to sell their properties ? I know there's a lot of people in the network that have seen my stuff and they've seen us do a lot on the buying side , because that's what we do . We are the largest buyer of seller-financed income producing properties in the United States and , gosh , going back to 2008 , 17 years as we speak , we've bought more than 700 units with seller financing . It has been tried and true , the strategy that I love the most . I think it gives the best benefits . But interesting thing has happened since I started putting some of these training contents out on YouTube and on the podcast here , that we actually lost at least two , maybe three , deals in the last two years because we get a property under contract and then they would take a look at our YouTube channel and they'd see our videos talking about the great benefits of buying with seller financing and they go oh gosh , these guys , this is too good of a deal . So I don't know the truth is . And then I guess they think that we're trying to get one over on them or something . I don't know , but that couldn't be further from the truth .

Speaker 1 1:30

The reality of it is if they actually did listen to those , even on the buying videos , we always talk about one of the things I love the most about seller financing and about real estate in general as an investment strategy and asset class is . It is one of the few things where you can have a buyer and a seller walk away from the transaction table and both sides can win . Honestly , I don't think there's any structure that's more true than seller financing . When you really look at it , you know the banks and the big hedge funds coming in that are looking to buy up distressed properties at pennies on the dollar . Those are the guys trying to rip you off If you're using seller financing . If there is a strategy that exists that benefits both parties , both sides , more , I don't know what it is . So today we're going to talk a little bit about something I've never done before . We're going to show what I believe the top eight benefits to sellers are .

Speaker 1 2:25

Anybody out there who's looking to sell a home or an investment property for offering seller financing as a strategy ? And before I get into that , as always , guys , we'd really appreciate it if you would subscribe . I'm grateful that we've got some good content coming for you this month , and I love doing this . A lot of people ask me why are you doing the podcast ? Because not only do we not make money from it , but actually cost a fair amount of money and certainly a lot of time to do . But I just love doing it . It's a lot of fun

Premium Purchase Price Advantage

Speaker 1 2:54

and I love connecting with new people that are like-minded investors and entrepreneurs in my network and just getting to showcase some of the things that I'm passionate about with you guys . So if you do enjoy it , if you do benefit from it , it really means a lot and it lets me show everybody that's telling me stop wasting time with the podcast that it's worthwhile . So please subscribe , either on Apple Spotify or , of course , here on YouTube . And , as always , thank you too .

Speaker 1 3:19

For whatever reason , everybody seems to love this show on Player FM . You guys are now my favorite . I had never heard of Player FM before we started this thing , but we've got about 280 times more subscribers on Player FM than anywhere else . So , thank you guys , keep it coming , hit that button wherever you're at . We really appreciate it . So let me give you some visuals , guys , and we're going to try to do this as quickly and as effectively as possible , and I could make it pretty for you , but if you're in my network , you probably care less about the pretty and more about the numbers , and so just really going to focus on the numbers here . And if you're on YouTube and you can see the video or Spotify , you'll be able to see the video of this . That'll probably be even more helpful for you , because I'm going to pull up just a simple little chart that I made here and we're going to go through these one at a time and , as you can see me scrolling , we've got some , got a lot of benefits here .

Speaker 1 4:14

So the top reasons that a seller should consider using seller financing to market and sell your property number one that's probably the most obvious to everybody if you know even a little bit about seller financing , and this is probably by far the biggest benefit you're going to get a premium on the purchase price . Okay , so that means and you see , I got a little example here let's say you got a condo which I just had , one that actually gave me the idea to do this where I just ran through it for the seller off the top of my head and showed them how much more they would make over a five-year period if they sold it to us with seller financing . This was a condo in Las Vegas . So these are the real numbers from that deal . So market value let's say your condo is $460,000 . So that's what it's actually going to probably sell for in this scenario .

Speaker 1 5:04

If you went and listed it for a normal traditional cash buyer or somebody using bank finance and we're just going to cash you out , you probably listed at $500 , you listed at $480 , you end up at $450 , $460 . If you sell it the normal way , that's what you're going to get . That's it . You walk away with $460,000 . You pay your escrow costs , you pay your agent commission , so on and so forth .

Speaker 1 5:31

If that's the case , a pretty standard premium that you could expect to get and this might even be low depending on what markets you're in and what terms you're offering with seller financing you can easily get $500,000 for that same property . That's worth $460,000 cash . You can jack that price up up to 500,000 , get that premium , and it's a fair thing to do because you're offering to take that money over time with terms . So now . So if you just look at it like that , it's like , okay , you're making an extra 40 grand , right , that's all fine and that's great and honestly , that would be worth it in a lot of scenarios just by itself . But let's really look at it how much extra cash you get , and I think you're going to be shocked a lot of sellers out there when you really look at these real simple numbers here . So for the sake of argument , we're just going to use these hypothetical rates With a 5% interest rate and a lot of people charge more than that .

Speaker 1 6:23

A lot of them go for seven , eight , even double digits right now , but let's just say with a pretty low interest rate . So you're making it fair to the buyer too of 5% in a pretty standard five-year term . So that five-year term that's how many years the seller is acting as the lender and carrying the loan before the balloon payment is due . And then for the down payment , industry standard is 20% down , which in this scenario of a $500,000 purchase price , 20% down would be $100,000 . So with interest only amortization which very few people do that , but everybody should if you're an investor and that's what we always try to do your annual debt service is going to be $20,000 .

Speaker 1 7:06

And the way you calculate that is $100,000 for your down payment on your $500,000 purchase price . That leaves you with a balloon payment , a note of $400,000 , 5% of that when using interest-only amortization . So you're not paying down any principal with your payments , you're only paying interest , 5% of $400,000 , simple math . There is $20,000 a year . So your annual payments to the seller , with seller financing , are going to be $20,000 . And since none of that is being applied to principal , that's all interest for the seller , that's all cash flow slash profit , interest earned profit for the seller . Ok , so that means , since we gave him one hundred thousand dollars up front and now the seller , you're getting twenty thousand dollars a year .

Speaker 1 7:58

And of course , in this scenario and any properly done seller finance scenario , the buyer is paying all the HOA , all the taxes , the insurance , all the cost of the property . So this is a pure if you own it , free and clear , and you didn't have any underlying note , which that's a whole other thing . We could do another episode on . You're getting a net $20,000 in pure profit interest earned income to you every year , since it's done for a five-year term . That's $100,000 , five times $20,000 , $100,000 in interest paid to the seller during the five-year term . Okay , so we'll talk about the cash flow benefits of that in a moment too , and some of the tax deferment savings , but this is the biggest thing . So over the course of the five years now let's do a side-by-side comparison .

Speaker 1 8:46

If I'm a seller and I sold my property for $460,000 cash , okay , so then I'm walking away . That's what I get . I mean , there's no mystery there I'm walking away with $460,000 , minus , of course , the escrow costs , any selling fees , agent commissions . So you're really I mean you're talking about $420,000 or so , whatever that would add up to when you're all said and done . But we're not going to even factor that in because you'd still be paying agent commissions and you'd still be paying escrow fees on both of these . So that doesn't really come into play . So let's just assume for this hypothetical scenario , you're walking away with $460,000 as your gross and we're going to call it our net because we're not factoring in those extra fees , like I said . Okay , so that's $460,000 . That's it . That's what you get when you sell at cash .

Speaker 1 9:37

With selling with seller financing . You got $100,000 up front as your down payment . You got $100,000 up front as your down payment you can take and do whatever you like with . Then you got $100,000 in interest payments during the five-year owner carry term . So you've already got $200,000 right there . Then at the end of the five years , because you did interest only , which is smart for the investor to do , for us as investors to do , because that makes your debt service lower , which makes the cash flow better , which makes your cash on cash return better . So this is a win for everybody . The reason it's good for the seller is now you haven't paid down that principal at all . So they're getting that full $400,000 balloon payment at the end of five years payment at the end of five years . So $100,000 down payment , $100,000 in interest only loan payments paid to you as the seller over the five years , another $400,000 in the balloon payment paid after five years . That's $600,000 .

Speaker 1 10:37

So compare the two side by side . Again , you sold it cash , you got $460,000 up front . You walk away , do whatever you're going to do with it . Obviously , if you need to buy another property immediately , you need every penny you can get right here right now , then yeah , selling it . Cash obviously is going to make more sense . Cash obviously is going to make more sense If you're in a position where you don't have an immediate need for all of that capital . You already have your primary residence . You're just going to maybe put it into another investment property , you're going to put it in your bank account . There's no doubt this makes more sense because you're comparing your $460,000 that you would have got selling a cash to $600,000 that you would get over the course of the seller finance deal .

Speaker 1 11:24

So that's an extra $140,000 , which is around 30% more in this scenario , and that's a pretty good . The numbers will obviously go up and down depending on the purchase price of the property and the terms , but that's a pretty conservative , pretty accurate percentage . Over the course of a five year you're going to get 30% more . Now , if you did it , I'll just do this one off the top of my head . As I said , 5% that's a good , fair rate . But hey , since this one's supposed to be for the sales , what if you really went hardcore with it and charged 8% ? Okay , so now you are getting $32,000 just doing this on the fly .

Speaker 1 12:06

So 8% of your $400,000 note $32,000 a year on your debt service . So now , over the five years , that is $160,000 . That's an extra $60,000 . This is why the interest rate is so important . People rarely think as much about the rate and the amortization . That's far more important than the price . The price is the least important thing . The rate and the down payment are the most important things for both sides . That's why we argue about the most . So now you're getting $160,000 over the five years . So now $660,000 versus $460,000 , which , of course , is an extra $200,000 more , which is about 45% . We'll call it 46% , I think , just real quick off the top of my head . Well , now I'm curious to see how much that is , because that's going to bug me . So that's an extra 43.4% in that scenario .

Speaker 1 13:11

Now , if you start getting terms like that I mean I guess this is supposed to be slanted towards the seller Then I don't think it's really a fair deal for the buyer anymore . But those are very common , they're out there . You can charge 8% . I mean , I think 6% is probably the most fair number . We usually try to get three or four , honestly , and then maybe you settle it at four or five Six is probably the mid-range you start charging seven , eight or more and then it starts to become more advantageous just to use bank financing for the buyer . So that's just a shocking thing , guys .

Speaker 1 13:45

So in this scenario you're going to net over a five-year period as the seller anywhere from the initial scenario , the original scenario we use , with a 5% rate of an extra $140,000 on your property over the five-year term . So if you divide that over the five years , you're making an extra twenty , eight thousand dollars a year in just pure profit , pure interest on your property . Or if you want to charge kind of a mafia style , eight percent or higher , you can get that number up to as much as an extra forty , fifty thousand dollars a year and just pure profit . It's all profit . So that's the biggest reason and that alone makes it worth doing the other one that we're going to touch on briefly here , these other six to eight reasons I've got here that are benefits for sellers

Broadening Your Buyer Pool

Speaker 1 14:31

.

Speaker 1 14:31

You broaden your buyer pool . There's only so many people that are going to buy your property , even if you have it at market value price or even slightly below market value . Even if you have it at market value price or even slightly below market value , bank financing right now is pretty much garbage . The rates are obnoxious . The buyer pool is used to these low interest rates that we've all been so happy and grateful for the last couple of decades here , or at least the majority of the last decade and so paying 7% , 8% , when investors are used to paying two and a half to five is you know , it's just not going to work for you to get the maximum buyer pool .

Speaker 1 15:08

There also are some situations that , if you're dealing with this right now , you probably know exactly what I'm talking about and it's probably a big thing for you A lot of HOAs . If you're in a condo situation or even any property with an HOA , it's very common to have HOA litigation , and if your HOA is in a litigation situation , or if they have any insurance situations which is also common it's nearly impossible to get traditional bank financing , so you might have to . So then , if you want to market your property in a situation like that , that means the only people that can buy your condo or your property are people that are buying cash , or , if you want to open it up to seller financing and those people that are buying cash , everybody who's apparently so afraid of people trying to buy seller financing and offer these great terms , you should really be afraid of the people buying cash , because they're going to beat you up on the price and then you're just going to get murdered on the terms , and that's the worst . So you broaden your buyer pool and I didn't even put this as a bullet point , but this is a key thing for all of us that care about just being kind and wanting to be a positive part of somebody else's life in a good way . I'm looking at it as the investor standpoint , because myself and my partners , obviously that's what we do as investors . But if you open it up with seller financing , you might sell it to some beautiful young family or old family , whoever it may be that , for whatever reason , might have credit issues , or maybe they have good credit but they're self-employed and they just can't get good terms with bank financing , and you can help those people achieve the dream of home ownership , and that's a blessing too . It really is . So if you care about that which I do and hopefully other people do too then that's another thing too . So broadening the buyer pool and it obviously by broadening the number of people that can buy your property increases competition , increases the terms , increases the price and hopefully it speeds up your sale process as well .

Speaker 1 16:58

Next one is another huge one too , which is you can defer the taxable liabilities , and I'm going to combine this with this one here of possibly minimizing or even eliminating tax liabilities . There's a little bit of debate on

Tax Benefits of Seller Financing

Speaker 1 17:12

this . Having bought and sold again hundreds of these , I've had this conversation a lot with a lot of really smart people and some not so smart people , but I've heard a lot of opinions on it . Some people think no , no , no , you have to pay all the . I can assure you you don't have to pay the full tax on the purchase price , because if that was the case , all these properties that we bought for 10% down , 20% down or less , none of those deals would have happened because the sellers would have been coming out of pocket . So you can , at the very minimum , defer the taxable liability . So instead of in that scenario above , instead of paying your cap gains on a $500,000 sales price , you could pay your cap gains on that $100,000 down payment and then defer the rest until the balloon payment five years later . Defer the rest until the balloon payment five years later . And there are some people that have told me some strategies to where you can actually reduce that taxable liability over that five-year period with different strategies . I'm not a CPA so I recommend you talk to your tax professional about that , but there are strategies that exist that are effective , in some cases even eliminating that liability and converting the note into other structures to where you can , at a minimum you defer your taxable liability and it is possible to minimize it or eliminate some of it altogether .

Speaker 1 18:31

The other one , so the big risk I hear with sellers is oh gosh , well , what if they default

Default Protection and Cash Flow

Speaker 1 18:39

? Oh man , I got to foreclose and all that . And that's the absolute dumbest thing that anybody could ever say to me , because that would be the best thing that could ever happen to you . So we scroll back up here . Hopefully this is obvious , but apparently it's not . Scroll back up here .

Speaker 1 18:55

So you're selling your property that's worth $460,000 . You got $100,000 up front . In this scenario , with your down payment , a lot of people can get more . You can ask for $30,000 and you're getting $150,000 . So you're getting around 23% , 24% of your or as much as 30% , depending on what down payment you're getting of your property's actual value up front and you're getting the interest payments for however long you get them . Let's say you sell it and your buyer defaulted after a year . In that scenario , well , now I've got all the rates all over the place , but at 5% you just got $120,000 . So you got more than a quarter of your property's value in less than a year . And now , guess what ? You can foreclose in about three , four months , and now you can sell that property again . And then you got your property . Or you can just keep it , and maybe all you needed to want to keep it was that extra 120 grand . And now you've got it . And now you just keep it , or you can just keep it , and maybe all you needed to want to keep it was that extra 120 grand . And now you've got it . And now you just keep it or you sell it again .

Speaker 1 20:02

We used to do that in the land business 20 years or so ago and I was selling lots in uh deming , new mexico , in the middle of nowhere , nevada . I mean , that was part of the business model is that a huge percentage of people would buy these lots with seller financing and then they would default and then we would sell the same property you know , half a dozen times and you don't want that to happen , but that's the reality of it . So obviously you do your work on the front end to make sure you know , because nobody wants to have to foreclose on somebody you know acting in best faith and good faith with both parties . You don't want that to happen . So you try to make the terms reasonable , upfront , so that you don't have to deal with that . But if you do , even though it's a sad and stressful thing , maybe from an investment standpoint , it's by far the most profitable thing that could ever happen to you and you sell the same home twice and then you're really making incredible returns .

Speaker 1 20:56

So again we kind of touched on this monthly cash flow which , again , if you're doing it with interest only , amortization , that's all pure profit . Okay , unless you have an underlying note and you're doing some type of a wrap . But either way , still it's net profit to you , whatever your net proceeds are . So that's money that you can put into your pocket every month . And again , depending on what your situation is , if you're just gonna put this into a CD or the stock market , you're gonna earn a similar or lower return and you're not gonna be able to really spend that . You're not gonna get a monthly dividend from your CD . You're not gonna be able to touch it at all . It just sits there and grows by 2.5% or whatever it is .

Speaker 1 21:38

With this , you're earning 6% to 8% a year in net interest-only payments to you . That are pure profit . That goes right into your pocket , right into your bank account , tax-deferred , that you're able to utilize for whatever you need right there . There's not a lot of investments that you could take that lump sum and put it into , unless you bought another rental property , but even then you're going to have all the stress and liability and expense that comes with managing a rental property . With this , you're just getting straight monthly cash flow on a property . It's secured by an asset that you're intimately familiar with . That you know better than even the person you sold it to , because it's been your property for however long you've owned it and you're getting that consistent cash flow in your pocket every month . I think that's a massive , massive benefit for the right kind of seller More certainty that the transaction actually gets closed

Transaction Certainty & Closing Benefits

Speaker 1 22:32

.

Speaker 1 22:32

Okay , what I mean by that is when you're using bank financing and I've had it you know the bigger and the more expensive the property , the more common this is right . I mean we've sold some pretty expensive properties and there's a lot of legwork . First you got your inspection contingency right . Then you got your buyer's financing contingency , which a lot of time that runs right up to the close lot of time that runs right up to the close . And so even the buyer , large percentage of the time even the buyer doesn't really know , because it's not up to them , if they're going to actually be able to close and because of that financing contingency their earnest money is protected pretty much the entire duration of the close . And I've had buyers string me along for months on this bank financing contingency nonsense .

Speaker 1 23:17

So when you are the bank , when you're doing seller financing , you're the lender . You don't have any of that risk . All of that nonsense goes right off the table and you're the one who has all the control . You get to decide when the loan's approved . You get to decide it's approved for closing . All you have to do is collect the down payment from the buyer and you're ready to close . So it dramatically increases . It puts all the control and the power for you honestly , as the seller , to where you're the one who's going to decide if this transaction happens . You're not reliant on so many third parties with the banks and appraisals and all this nonsense . You are the bank , you are the appraiser , and if you want it to close and the buyer provides the down payment , hopefully , then it's going to close . So that's a great blessing as well , and , I already mentioned , you're earning interest on an asset that we're intimately familiar with , which is great as well . So these are just some of the benefits , guys . I hope that helps a little bit .

Speaker 1 24:14

On the

Final Thoughts and Flexibility Advantages

Speaker 1 24:15

seller side , I hope that we talked about enough here to give you an idea of why you should at least consider using seller financing , especially right now too , guys . I mean , again , with the rates being as high as they are , this is one of the best times in my lifetime to use seller financing , both as a buyer and as a seller . So I'm shocked that it's not becoming more common . As a buyer and as a seller , so I'm shocked that it's not becoming more common . I hope that it . Well , I mean I'm fine actually either way , because it's such a blessing to me and my partners and the people I come in contact with . If we're the only ones doing it , then less competition and we get better terms . But I really genuinely mean it . I really hope that this video properly illustrates that it really is a win-win for both sides .

Speaker 1 24:56

Obviously , again , there's going to be some sellers . If you just need that 400 grand right here right now , you're going to go buy another house and you need it , that's fine . I mean then , yeah , take the cash , you should do that . But if you're somebody that has a little more flexibility , got some options . There's no question that seller financing at the terms and again , this is another beauty of it You're working with a human being on both sides instead of working with a bank , and it's all flexible . Every one of these numbers up here , every single one of them , from the price to the interest rate , to the amortization , to the down payment , to the length of carry term all of it is negotiable . And there's even more levels I could go deep with it of how you can tailor it for what you want and then try to fit that with what the buyer wants and both parties can win and it can be a real home run .

Speaker 1 25:43

So grateful that you guys took the time to watch this or listen to it . I hope that it's beneficial for you in some way , grateful to have you , as always , in my network and again , if you would like to make me happy , hit the like button or the subscribe button or , better yet , leave me a comment somewhere on what you'd like to see for some of our more seller financed and real estate investing strategies content . That we do because we'd like to produce more , but we want to give you what you want to see . So have a blessed Memorial Day weekend and we will talk to you soon . Thanks so much .