Most real property (real estate) transactions for the sale and purchase of property involve a buyer who secures financing (a mortgage loan) from a bank for the purchase of the property and transfers the lump sum purchase price to the seller at the closing, in exchange for the seller transferring the deed (title) to the buyer—or to an escrow for safekeeping until the buyer repays the loan to the lender.

But if the buyer does not have good credit or a sufficient credit history—and especially if the seller wants to sell the property to a specific person—the seller may consider seller financing for the transaction. In a seller-financed transaction the buyer signs a promissory note promising to pay the purchase price of the property to the seller over time, plus a stated interest rate, which is included in a monthly installment payment projected over some number of months or years.

Seller financing is often structured for the buyer to make monthly payments for a number of years (five years, for example) and then make a balloon payment for the remaining balance of the loan. This seller financing structure anticipates the buyer being able to secure a traditional loan from a bank with improved creditworthiness and some equity in the property (a home, for example).

There are pros and cons to seller financing for both the buyer and the seller. Seller financing may reduce closing costs and shorten the time to closing, but the buyer may pay a higher interest rate and the seller will take on risk that the buyer will default on the payments and the seller will have to go through the legal process of evicting the buyer from the property.

In North Carolina, seller financing is a legal alternative to traditional mortgage lending for real estate transactions. This arrangement involves the seller acting as the lender, providing the buyer with a loan to purchase the property. The buyer signs a promissory note agreeing to pay the seller the purchase price plus interest over a specified period. Often, these agreements include a balloon payment where the buyer pays the remaining balance after a set number of years. Seller financing can offer benefits such as lower closing costs and a quicker closing process. However, it also carries risks, including the potential for a higher interest rate for the buyer and the risk of default for the seller, which could lead to a legal process to remove the buyer from the property. It's important for both parties to carefully consider the terms and legal implications of seller financing and to draft a clear and enforceable contract. An attorney can help navigate the specifics of the transaction and ensure compliance with North Carolina's real estate laws and regulations.