Although most property owners prefer their cash at closing, if a seller outright owns the property for sale, he/she may consider financing all or a portion of the amount of the sales price.  Thus, when a seller is willing to accept part of the property’s purchase price in form of a promissory note by the buyer accompanied by a mortgage or deed of trust, it is called Seller Financing.  This allows the buyer to substitute a promissory note for cash and the seller is said to be “taking back paper.” 

Seller financing is more popular with land sales where it is difficult for a buyer to obtain a loan from a bank.  It can also occur on property where an existing mortgage is being assumed by the buyer and on property where the seller prefers to receive his money spread out over a period of time with interest instead of lump-sum cash.