By Prerna Kapoor, CLHMS | REAL Brokerage | September 10, 2026
Freddie Mac’s weekly survey put the 30-year fixed rate at 6.71% the first week of September, up from 6.66% the week before and about a fifth of a point higher than a year ago. Rates have been stuck in that band for months now. If you own your Colorado home free and clear, or close to it, that stubborn number is part of why “seller financing” keeps coming up in listing conversations this fall.
What “Seller Financing” Actually Means
Seller financing, also called owner carry or a purchase-money mortgage, is simple in concept: instead of the buyer getting a loan from a bank, you become the lender. The buyer signs a promissory note and a deed of trust in your favor, makes a down payment, and pays you monthly, usually with interest, until the loan is paid off or a balloon payment comes due.
It is not the same as a lease-option, and it is not the same as advertising an assumable mortgage, where a buyer takes over your existing loan balance and rate. With owner carry, you are creating a brand-new loan, and in most cases you need to own the home outright, or get your existing lender’s consent, before you can put a buyer in second position behind you.
Why This Is Coming Up More in Colorado Right Now
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Two things are converging. First, rates near 6.71% keep a meaningful slice of buyers priced out of a conventional loan at the number they’d need, even when their income and down payment are otherwise solid. Second, Denver metro homes are sitting on the market longer than they were a year ago, so sellers have more reason to consider a tool that widens the buyer pool instead of just cutting price again.
In my own Parker and Douglas County listings, the sellers who ask about this tend to be the same profile: someone who has owned the home eight, ten, fifteen years or more, has little or no mortgage left, and is downsizing or relocating rather than needing the full sale proceeds in one lump sum right away. For that seller, carrying part of the note can mean a faster sale and a steady stream of interest income instead of parking cash in a savings account.
It is not for everyone. If you need every dollar of equity at closing to buy your next place, seller financing usually is not the right fit, and I will tell you that directly before we go further down this road.
The Legal Guardrails You Cannot Skip
This is the part that gets glossed over in casual conversation, and it should not be. Federal rules under Regulation Z give an individual seller a narrow exemption from mortgage loan originator licensing requirements, generally covering up to three owner-financed sales of property you owned in any 12-month period, provided the loan is fully amortizing, carries a fixed rate or an adjustable rate that does not reset for at least five years, and you make a genuine, good-faith determination that the buyer can actually repay it. You can read the underlying rule directly from the Consumer Financial Protection Bureau.
Colorado licenses mortgage loan originators through the Division of Real Estate under the state’s SAFE Act framework, which tracks this same federal structure. Go beyond the exemption, skip the ability-to-repay determination, or structure the loan with a prohibited feature like negative amortization, and you are exposed in a way that a simple handshake deal does not protect you from. This is a “hire a Colorado real estate attorney before you sign anything” situation, not a do-it-yourself one, and I say that as someone who wants the deal to actually hold up, not just close.
What It Actually Looks Like in Practice
A typical structure asks the buyer for a meaningful down payment, often in the 10% to 20% range, sets an interest rate that is usually a bit above what a bank would charge to compensate you for the risk, and runs for a set term, sometimes with a balloon payment after five to ten years that pushes the buyer to refinance into a conventional loan once their credit or income picture improves. The promissory note and deed of trust get recorded just like a bank loan would be, and most sellers use a licensed loan-servicing company to collect payments, track escrow for taxes and insurance, and issue the required tax documents, rather than handling collections themselves.
If you still owe money on your own mortgage, your lender’s due-on-sale clause matters here too. Selling with owner financing without addressing that first can trigger your existing loan to become due in full, so this only works cleanly for sellers who are free and clear, or who get explicit written consent from their current lender.
The Real Risks You’re Taking On As the Seller
You are now the lender, which means buyer default is your problem, not a bank’s. If the buyer stops paying, you are the one initiating foreclosure, and that process takes time and money in Colorado just as it would for any lender. You are also carrying a large asset off your balance sheet in the form of a note instead of cash, which matters if you were counting on the full proceeds for your own next purchase.
There is a tax angle worth knowing about too. Seller-financed sales are often reported as installment sales, which can spread your capital gain over the years you receive payments instead of all at once in the year of sale. That can be an advantage or a complication depending on your situation, and it connects directly to the capital gains rules Colorado sellers already need to understand. Talk to a CPA who has actually structured an installment sale before, not just heard of one.
Quick answers
Can any Colorado seller offer financing?
Only if you own the home free and clear, or your lender consents in writing if you still have a mortgage. Beyond that, federal and state rules limit how many owner-financed sales you can do in a 12-month period before you need a licensed mortgage loan originator involved.
Do I actually need a real estate attorney for this?
Yes. The promissory note, deed of trust, and ability-to-repay documentation need to be drafted correctly by someone who does this regularly in Colorado. This is not a fill-in-the-blank form situation.
What happens if the buyer stops making payments?
As the lender, you would need to initiate foreclosure under Colorado’s public trustee process, the same general framework a bank would use, which takes months and real legal cost. Most sellers use a licensed loan servicer from day one so payment history and default notices are documented properly if it ever comes to that.
Prerna Kapoor | REALTOR® | Luxury Home Specialist
REAL Brokerage | 720-949-5450 | info@prernakapoor.com
CLHMS • RENE • PSA • ABR | International Sterling Society Award Winner
Prerna specializes in residential real estate across Parker, Aurora, Lone Tree, Castle Pines, Highlands Ranch, Cherry Creek, Greenwood Village, and Centennial. She speaks English, Japanese, and Hindi. For more on how Colorado buyers finance a purchase, see the Colorado Buyer Financing Playbook, and for the mechanics of the deed of trust itself, see how to read a Colorado title commitment. If a rent-back instead of owner financing sounds closer to your situation, here’s how rent-back agreements work in Colorado.
