Seller Financing had a great 2023! We saw a 7.3% increase in the creation of owner financed notes and a 24% increase in dollar volume.
Check out the owner financing stats for the past year and how that affected the note industry.
Here are some numbers at a glance…
- $28 Billion in seller-financed notes were created in 2023 (up from the $22.5 Billion in 2022).
- 89,773 Transactions were owner financed (up from the 83,647 in 2022).
- $125 Billion in owner financed notes were created in the past 5 Years (2019 to 2023).
- March saw the highest creation of notes at 8,090. February saw the least with 6,577.
- Sellers creating one note in 12 months made up 86% of the seller carry notes.
- 67% of transactions were created in just 10 states.
- The average Loan-to-Value (LTV) went up for commercial and land notes, but down for residential notes:
- 74% LTV on new Residential notes (compared to 75% in prior year),
- 72% LTV for Commercial, (up from 66% in prior year), and
- 70% LTV for Land notes (compared to 68% in prior year).
What Led to the Increase in Creative Financing?
2023 saw a 7.3% increase in seller carried notes from 2022. That was the largest increase by percentage in the past 10 years. More notes were created in 2023 than any year since 2018!
Scott Arpan of Advanced Seller Data Services, shares his insights. “This growth might have been much larger if the housing market was more robust. Since 2015, the number of seller-financed residential loans roughly correlated to existing home sales. National existing home sales fell almost 19% according to the National Association of Realtors. We saw a 6.7% increase in the number of sellers carrying 1st position residential loans.
Higher interest rates are viewed as the primary cause of the sharp jump in seller carry loan creation.
Mom and pop sellers and commercial properties lead the way.
The number of one-off note holders jumped 8.5% over 2022. Most of these sellers are individuals or revocable trusts. A majority of the remaining one-off noteholders were small business owners who used seller financing to sell their commercial building used to operate their business. They often sold inside their LLC or similar corporate structure.
Commercial loan dollar volume increased nearly 60% over 2022 and 30% over 2021 levels. Commercial properties are likely to continue their run as banks become more reluctant to lend on many commercial property types. There should be a great opportunity for note brokers working in this market.
The number of note holders creating 4 or more seller financed notes within 12 months was the only category to drop from 2022 counts.”
What About Seller Financing in 2024?
Scott continues, “While interest rates are projected to decline over the next 24 months, I project the number of new seller-financed transactions will remain in the 90,000 per year range in the short term. Residential and land notes will likely remain steady with commercial secured notes continuing to increase over historic levels.
However, current events are in the background that could cause economic shocks. That could require banks to pull back lending standards, forcing more sellers to finance buyers, creating more inventory of notes. Rising geo-political conflicts and political turmoil in the US, especially over government spending, could create such a shock.”
Through the Years – the Seller Financing Numbers
| Year | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
| Count | 116,178 | 105,871 | 97,089 | 89,779 | 91,605 | 86,155 | 84,007 | 89,678 | 83,647 | 89,773 |
| Change | +4.7% | -8.9% | -8.3% | -7.5% | +2% | -5.95% | -2.49% | +6.75% | -6.73% | +7.32% |
Seller Financing by Dollar Amount
Where Are The Notes At? – Top States for Owner Financing
Everything is bigger in Texas — and in Florida, California, North Carolina and Georgia. The Top 5 States for Seller Financing remained the same from 2022. All combined, the top 10 states for the creation of seller financed notes made up 67% of the overall volume.
| State | 2022 Count | 2023 Count | Percentage |
| Texas | 20,922 | 22,361 | 24.9% |
| Florida | 7,676 | 8,270 | 9.2% |
| California | 6,722 | 7,220 | 8.0% |
| North Carolina | 4,393 | 4,500 | 5.0% |
| Georgia | 3,687 | 4,055 | 4.5% |
| Arizona | 3,628 | 3,662 | 4.1% |
| Washington | 2,762 | 2,913 | 3.2% |
| New York | 2,818 | 2,765 | 3.1% |
| Pennsylvania | 2,099 | 2,331 | 2.6% |
| Oregon | 2,054 | 2,186 | 2.4% |
| Top 10 | 56,761 | 60,263 | 67.0% |
| All 50 States | 83,647 | 89,773 |
Wondering how the remaining 40 states compared? Download the full report for a state by state listing.
Carry Back Notes by Property Type – Stepping Outside of Residential Notes
While seller-carry residential notes continue to dominate the industry, there are plenty of opportunities to branch out with commercial and land notes. Here is a look at the number of notes created by property type (from records where property type is known).
| 2019 | % | 2020 | % | 2021 | % | 2022 | % | 2023 | % | |
| Residential | 46,891 | 54.5% | 42,359 | 50% | 54,443 | 61% | 52,801 | 63% | 56,352 | 63% |
| Commercial | 10,458 | 12% | 10,588 | 13% | 14,794 | 16% | 13,415 | 16% | 15,142 | 17% |
| Land | 12,956 | 15% | 13,608 | 16% | 16,921 | 19% | 14,333 | 17% | 14,418 | 16% |
| Unknown | 15,850 | 18.5% | 17,452 | 21% | 3,520 | 4% | 3,098 | 4% | 3,861 | 4% |
| 86,155 | 84,007 | 89,678 | 83,647 | 89,773 |
Average Note Size, Down Payment and LTV For Seller Financing
The average residential note balance was $248,523 for owner financed notes in 2023. The average Loan-to-Value (LTV) for residential notes was 74% which correlates to a down payment of 26%. Many people mistakenly believe that all seller financing involves little to no money down (LTV calculated using data from states with sales price disclosure).
| 2020 | LTV% | 2021 | LTV% | 2022 | LTV% | 2023 | LTV% | |
| Residential | $180,737 | 82% | $269,201 | 77% | $225,857 | 75% | 248,523 | 74% |
| Commercial | $423,283 | 75% | $495,266 | 71% | $432,590 | 66% | 613,077 | 72% |
| Land | $449,903 | 76% | $233,128 | 70% | $247,735 | 68% | 247,536 | 82% |
Single Note vs. Multi-Note Creations
The majority of notes were created by “Mom and Pop” sellers in 2023. The group of sellers creating 2 or more notes (the group often coined the professional user of owner financing) in a 12 month period were responsible for 14% of the new notes created. When you break down this group further we see 8% in the 2-3 notes per year and 6% in the 4 or more category. The group where the seller created one note is considered the “Mom and Pop” seller. There are also differences in the exemptions and requirements under the Dodd Frank Act based on the number of seller carry-back notes.
| 2019 | 2020 | 2021 | 2022 | 2023 | |
| Note Count Where Seller Created 1 Note* | 74,586 | 68,257 | 75,279 | 70,807 | 76,780 |
| (% of Notes Created by Count) | 87% | 81% | 84% | 85% | 86% |
| Note Count from Sellers Creating More Than 1 Note* | 11,569 | 15,750 | 14,399 | 12,840 | 12,993 |
| Totals | 86,155 | 84,007 | 89,678 | 83,647 | 89,773 |
Notes Created by Individual, Corporate Entity or Trust
Thanks to Advanced Seller Data Services, a mailing list provider for providing these 2023 stats. They are based on 2,236 counties reporting, balances of $30,000 or higher, on 1st position or wrap/AITD notes.
What are your thoughts on the recent statistics? Leave your comments below.
Thank you for providing this thought provoking analysis! I expect 2024 will be another big year for seller financed notes.