Selling a House with Seller Financing in Washington

With seller financing (also called owner financing), you sell your house and act as the lender: instead of receiving the full price at closing, you receive a down payment and then monthly payments from the buyer, secured by the property. Sound Home Buyer sometimes buys this way. It can work well for the right seller, and it carries real risks.

This is general information, not legal or tax advice. Seller financing involves a promissory note, a deed of trust, and tax and licensing rules that depend on your situation. Have a Washington real estate attorney and a tax advisor review any offer before you sign.

Why some sellers choose it

• Income over time. You receive payments with interest instead of one lump sum.
• A possible higher price. Some buyers will pay more in exchange for flexible terms. That depends on the deal and isn’t guaranteed.
• The house can be sold as-is. Like any as-is sale, the price reflects the condition.
• Tax timing. Under federal rules, an installment sale can let you report part of the gain as you receive each payment (IRS Publication 537). Depreciation recapture on a rental is generally reported in the year of sale, and you can choose to report all of the gain up front. Your tax advisor can tell you whether this helps you.

Risks to understand

• The buyer might stop paying. If that happens, you may have to foreclose to get the property back, which takes time and money, and the house may come back in worse condition.
• Your existing mortgage. If you still owe money on the house, most mortgages have a “due-on-sale” clause that lets the lender demand full payment when the property is sold. Seller financing usually works best on a house that is paid off or close to it. Don’t rely on seller financing to get out of a foreclosure without talking to a housing counselor or attorney first.
• Licensing and lending rules. Washington’s Department of Financial Institutions (DFI) explains that sellers who carry financing on a home they don’t live in may need a license or waiver under the Consumer Loan Act, while financing the sale of the home you live in is generally exempt. Federal rules can apply too. An attorney can tell you how they apply to your sale.
• Your money is tied up. You won’t have the full sale price in hand, and selling the note later usually means accepting less than its face value.

How it works with Sound Home Buyer

If seller financing makes sense for your house, we put the price, down payment, interest rate, payment schedule, and what happens if payments stop in a written agreement. Closing happens through a title and escrow company, and the deed of trust that secures your payments is recorded. If a cash sale or listing with an agent would serve you better, we’ll say so.

Call or text 360-317-2777 to talk through the numbers.

Sources

• IRS Publication 537, Installment Sales; IRS Topic No. 705, Installment Sales.
• Washington State Department of Financial Institutions, “Residential seller financing” (dfi.wa.gov).

Last reviewed for accuracy: October 2026.