Should you offer seller financing when you sell your home in Washington?
Seller financing — where you act as the lender and the buyer pays you over time — can widen your buyer pool, support your price, and spread out your proceeds, but it ties up your equity and puts you at risk if the buyer stops paying. In Washington, these sales are commonly structured as a real estate contract or as a promissory note secured by a deed of trust, with payments often handled by a collection escrow. It works best for sellers who own the home free and clear, don’t need all their cash right away, and have a real estate attorney draft the terms. Federal rules also limit how often individuals can offer it and what terms they can use.
With mortgage rates averaging 7.18% the week of November 5, 2026 (Freddie Mac), more sellers are asking whether they could “carry the note” to attract buyers. For the right seller and the right buyer, it can work well. For the wrong one, it can turn into a headache that lasts years.
Here’s how it works and what to weigh. For the bigger picture on selling, see our Pierce County home selling guide.
How seller financing works
- You agree on terms with the buyer: price, down payment, interest rate, payment amount, length, and whether there’s a balloon payment.
- An attorney prepares the documents. In Washington, common structures include a real estate contract (the seller keeps legal title until paid off) or a promissory note secured by a deed of trust (the buyer gets title and you hold a lien).
- Escrow closes the sale. Real estate excise tax (REET) still applies, and title insurance is still issued.
- The buyer pays you over time. Many sellers use a collection escrow or servicing company to receive payments, track balances, and keep records.
- The loan is paid off or refinanced. Many buyers plan to refinance once rates drop or their credit improves, often triggered by a balloon date.
Pros and cons for sellers
Potential benefits
- More buyers. Self-employed buyers or those with nontraditional income may struggle with bank financing.
- Price support. Attractive terms can justify a stronger price.
- Interest income. You earn interest on the balance over time.
- Possible tax spreading. Installment sale treatment may spread taxable gain over several years — ask your tax professional, and see our post on capital gains tax when selling.
Real risks
- Default. If the buyer stops paying, you may have to go through forfeiture or foreclosure to get the property back — which takes time and money, and the home may come back in worse condition.
- Your cash is tied up. If you’re moving up, the equity you need for your next down payment stays in the old house. Our move-up and home equity guide explains why that matters.
- Your existing mortgage. If you still have a loan, it almost certainly has a due-on-sale clause. “Wrap” arrangements carry serious risk and need legal review.
- Regulatory rules. Federal lending rules limit how many seller-financed sales individuals can do and set requirements for loan terms. An attorney can make sure your terms comply.
How to protect yourself
- Require a meaningful down payment — more skin in the game means less risk.
- Review the buyer’s credit, income, and references, just as a lender would.
- Have a Washington real estate attorney draft the documents.
- Use a collection escrow to handle payments and records.
- Require proof of homeowners insurance naming you, and track property tax payments.
- Set a realistic balloon date that gives the buyer time to refinance.
This article is general information, not legal or tax advice. Seller financing has legal, tax, and regulatory implications, so work with a Washington real estate attorney and tax professional.
Alternatives to consider
If your goal is to make your home more affordable for buyers, a seller-paid rate buydown or closing credit may accomplish more with far less risk. See seller-paid rate buydowns in Pierce County. If your loan is FHA or VA, an assumable mortgage may also be an option.
Frequently Asked Questions
Is seller financing legal in Washington?
Yes. Washington sellers can finance a buyer’s purchase, commonly through a real estate contract or a promissory note and deed of trust. Federal and state rules apply, so use an attorney to draft the terms.
What happens if a buyer defaults on seller financing?
Depending on the structure, the seller may need to pursue forfeiture or foreclosure to recover the property. It can take months and cost money, which is why down payments and screening matter.
Can I offer seller financing if I still have a mortgage?
Most mortgages have a due-on-sale clause, so selling with an existing loan in place carries serious risk. Talk with your lender and an attorney before considering it.
Is a rate buydown better than seller financing?
For many sellers, yes. A buydown lowers the buyer’s payment while you receive your full proceeds at closing, without the long-term risk of acting as the lender.
Seller financing can be a smart tool in the right situation, and the wrong one in many others. If you’re weighing your options, The Barnard Group’s complimentary Home Selling Strategy Session walks you through your home’s current value, your options, and a plan built around your timeline. You can book yours at barnardgroupre.com/sellit.
About Josh Barnard
Josh Barnard is the founder of The Barnard Group and has spent over 20 years helping families navigate some of life’s biggest moments through real estate. Known for his “Work Hard. Be Kind.” approach, Josh combines expert market knowledge, innovative marketing, and genuine care to help homeowners make confident decisions about their next chapter. Whether someone is buying their first home, moving up, downsizing, or relocating to Pierce County, his mission is simple: serve people well, create unforgettable experiences, and help families build a life they love.
