The homebuying workaround more Californians are considering

When a deal like this works out, it can be the perfect ending for both parties

An aerial view of houses in Lancaster, Calif. 

When Eric Rewitzer and his wife Annie Galvin decided to move out of San Francisco after 30 years in the city, they found their dream home in Amador County. It was just what they were looking for — 13 acres of land with a timber frame home and a little art studio — but they couldn’t afford it. 

Two months later, in January 2019, a woman wandered into their San Francisco gallery and revealed that she was the owner of that home they loved. She had had a good feeling about them, she said, and the home still hadn’t sold. She asked if they were still interested and offered new terms. Most notably, she’d be the bank. 

What she proposed, which ultimately led to a successful sale, is called seller financing. It’s a lesser-known home financing option where a seller and a buyer bypass a traditional bank loan in favor of a direct loan. In a competitive and expensive housing market like California’s, coupled with the relatively high mortgage rates now, buyers are looking for creative ways to get into the real estate market. For sellers, looming tax implications might make an unconventional deal an attractive option, especially if the other option is not moving at all. Direct loans like these can even mean a lower interest rate, and for some prospective homeowners, such as those who have poor credit, they might be the only way to get a loan at all. 

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When a deal like this works out, it can be the perfect ending for both parties. 

‘Just people being good to each other’

Rewitzer, Galvin and the seller settled on a $100,000 down payment, a six-year loan with monthly payments at a 3% interest rate, and a “balloon” payment (a large lump sum) at the end. A lawyer, a mortgage broker and a real estate agent reviewed all aspects of the deal, protecting both parties should anything go wrong. In 2025, Rewitzer and Galvin made that final payment, and the trio went out to lunch, “and we just congratulated each other on a deal that really worked,” Galvin said.

Annie Galvin, left, and Eric Rewitzer at their home in Amador County, Calif.

Rewitzer said he doesn’t think many people realize this type of financing is even an option — they hadn’t. “It really was a great experience and just people being good to each other,” Rewitzer said. 

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“She was like our fairy godmother,” he said. “But we did her a huge favor too, of just being the people to step up and take over the responsibility for this.”

Now that Californians are staying in their homes longer than ever, often because of financial concerns stemming from Proposition 13 — the state law that keeps property taxes artificially low — or capital gains tax implications, he wishes more sellers knew about this practice. “I know a lot of people in San Francisco wouldn’t even consider it, but maybe it’s something to consider,” Rewitzer said.

A once unconventional deal is getting more common

Seller financing isn’t very common in the California real estate market — most experts estimate it’s around 6% of the market. But interest is growing, with one calculation showing seller financing deals increased by 8% between 2023 and 2024.

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San Diego Redfin agent David Zarraonandia said that’s partially because many people don’t know it’s an option at all. “A lot of agents are not going to pitch it just because they don’t have the experience or familiarity with it,” Zarraonandia said. “And because the agents are not pitching it, the sellers don’t really know their options.”

An aerial view of houses in Pacifica, Calif.

Zarraonandia completed a transaction recently that included seller financing. When it works out, it can be advantageous for both parties, he said, saying he told those recent buyers, “You guys just won the lottery on this deal.” 

This type of deal may especially appeal to sellers who don’t want to take an immediate tax hit, so Zarraonandia always makes sure to tell his clients about it. “It’s similar to getting rent, but you’re just able to sell it to somebody else and create your own terms,” Zarraonandia said.

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Seller financing last gained popularity during the 1970s and ’80s, when interest rates reached record highs. It’s not surprising it’s seeing a small resurgence. “The higher the rates get, I think it could become more and more common because the seller has a fantastic option to make really good money from an investment standpoint,” Zarraonandia said.

The ups and downs of creating homeowners

Still, seller financing won’t likely ever become a mainstream alternative. “There’s a lot more potential risks for both the buyers and sellers,” Zarraonandia said.

The terms of these loans are often much shorter than a traditional mortgage, so a large balloon payment after a short time period can be cost prohibitive for buyers. Plus, the seller determines if a buyer qualifies and sets the interest rate, so the rate could be higher than a bank’s rate. 

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A real estate sign reads, “Shown By Appointment Only.”

On the other hand, if the buyer defaults on the loan, the seller must initiate foreclosure proceedings, which are often expensive and lengthy. The seller would still be on the hook for any repairs needed as well. Then, they would need to go through the process of selling the property a second time. Even when a sale works out, a seller still has to pay taxes on the yearly income.

Because of these financial complications, for a deal to work, it should still involve a mortgage broker, an attorney and a real estate agent, said San Francisco Compass agent Amanda Jones. “You can’t shortcut the process,” Jones said. 

That said, Jones said she wishes more people knew about the option because, when both parties know what they’re getting into, it can be mutually beneficial. “Once you know your finances and you have a really good tax reason, it makes so much sense to me,” she said.

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Seller financing isn’t just for single-family homes, either. It can be used for vacant land or multiunit buildings, something Jones has experience with in San Francisco. One of her clients financed the sale of a 35-unit, tenancy-in-common building a few years ago. She said the seller was in his late 70s and that it was a great experience. “The guy created homeowners,” she said.

A house in downtown Julian, Calif.

Another client of hers knew his estate taxes would be too high if he sold, so he decided to finance several units he owned in Cole Valley to doctors and nurses who worked at UC San Francisco’s nearby Parnassus campus. She said he felt confident that type of buyer could be trusted, and his instinct was correct. He never had any defaults or late payments, according to Jones.

She said the uncommon financing occasionally comes up these days with prospective buyers in the tech industry, who don’t want to liquidate all their stock, but she noted that she hasn’t actually completed a seller financing deal in the past few years. Still, Jones told SFGATE, “I definitely think it’s a great option.”

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For Rewitzer and Galvin, the Amador County homeowners, it was more than luck that their deal worked out. It was a dream come true. “All of this came on the table because she was a motivated seller and we were motivated buyers and we had an incredible rapport,” Rewitzer said. “And she won, and we won.” 

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Tessa McLeanCalifornia Editor

Tessa McLean is the California editor for SFGATE. She joined the team in 2019, spending four years helming the local section. She now writes features with a statewide lens, telling stories about the issues, trends and news that matter in the Golden State. To submit tips, comments or messages about why you love California, please reach out to her at [email protected].