With seller financing, the park owner acts as the bank. Instead of borrowing the purchase price from a lender, you pay the seller over time. This guide explains exactly how the pieces fit together, walks through a worked example with hypothetical numbers, and lays out the process from first conversation to closing.
The mechanics: the four moving parts
1. Down payment
Cash the buyer pays the seller at closing. The amount is negotiated. It is the seller's protection: the more you put down, the less risk they carry.
2. Promissory note
The buyer's written promise to repay the financed amount. It sets the principal, interest rate, payment amount and schedule, maturity or balloon date, late fees, prepayment terms, and what counts as default.
3. Mortgage or deed of trust
The security instrument, recorded against the park. It gives the seller the right to foreclose if the buyer defaults. Which one is used depends on the state.
4. Deed
Transfers ownership to the buyer at closing. The buyer owns the park, and the seller holds a lien on it until the note is paid.
Amortization and balloon payments, explained
Amortization is the schedule used to calculate the monthly payment, for example 25 years. Each payment covers that month's interest first, and the rest pays down principal. Early payments are mostly interest.
A balloon means the note comes due before the amortization period ends. For example, payments are calculated over 25 years but the remaining balance is due in full after 5 years. Sellers like balloons because they get fully paid sooner. Buyers must plan to refinance, sell, or negotiate an extension before the balloon date.
Worked example
| Purchase price | $1,000,000 |
| Down payment (20%) | $200,000 |
| Seller-financed note ($1,000,000 − $200,000) | $800,000 |
| Interest rate | 6.00% fixed |
| Amortization | 25 years (300 payments) |
| Balloon | Remaining balance due at end of year 5 |
| Monthly principal and interest | $5,154.41 |
| Annual debt service ($5,154.41 × 12) | $61,852.92 |
| Total paid over 5 years (60 payments) | $309,264.67 |
| Principal paid down in 5 years | $80,543.31 |
| Interest paid in 5 years | $228,721.37 |
| Balloon balance due at month 60 | $719,456.69 |
Coverage check (hypothetical): if the park's net operating income were $85,000 a year, the debt service coverage ratio would be $85,000 ÷ $61,852.92 ≈ 1.37. That means income covers the payment about 1.37 times. Lenders you may later refinance with typically look at this ratio, so know it before you sign.
Payment formula used: P × r ÷ (1 − (1 + r)−n), where P = $800,000, r = 0.06 ÷ 12 = 0.005 per month, n = 300.
Step by step: from finding the deal to closing
Find owners open to terms
Long-time owners who own the park free and clear, or nearly so, are the most natural seller-finance candidates. Retiring owners often like monthly income instead of a lump sum. Ask early: "Would you consider carrying part of the price if the terms were right?"
Collect the park's numbers
Ask for the current rent roll (lot number, resident, lot rent, move-in date, balance owed), 2 to 3 years of income and expenses, utility bills, the list of park-owned vs. resident-owned homes, and a site map.
Check for existing liens
If the seller still has a mortgage, a simple seller-finance deal may not work unless it is paid off at closing or structured carefully, for example as a wraparound. Order a preliminary title report early.
Build your offer around the payment
Work backward from what the park's income can support. Price, down payment, rate, amortization, and balloon all trade off against each other. A slightly higher price with a lower rate or longer balloon can be better for you than the reverse.
Negotiate the key note terms
Rate, amortization, balloon date, prepayment rights without penalty, a grace period and right to cure before default, whether the note can be assumed if you sell, and whether the seller will subordinate to a future bank loan.
Sign a purchase agreement with a financing addendum
Put the seller financing terms in writing, attached to the purchase agreement, with your due diligence period and contingencies.
Run due diligence
Use the mobile home park checklist below. Verify the rent roll against bank deposits.
Have attorneys draft the documents
Your attorney, the seller's attorney, or both prepare the note, the mortgage or deed of trust, and closing documents. State rules on seller financing and lending can apply, so a local attorney matters.
Close and record
At the title or closing company, you pay the down payment, sign the note and security instrument, and receive the deed. The deed and the mortgage or deed of trust are recorded.
Set up servicing
A loan servicer collects your payments, sends statements, and keeps records, which protects both sides. Set calendar reminders for the balloon date well in advance.
Documents involved
- Purchase and sale agreement with seller financing addendum
- Promissory note
- Mortgage or deed of trust (recorded)
- Deed (recorded)
- Title commitment and owner's and lender's title policies
- Rent roll, lot leases, and estoppel or resident confirmation where used
- Bill of sale and titles for any park-owned homes
- Loan servicing agreement
- Insurance policy naming the seller as mortgagee
- Settlement statement
Mobile home park due diligence checklist
- Rent roll matched to lot leases and bank deposits; delinquencies and vacant lots
- Which homes are resident-owned vs. park-owned, and titles for park-owned homes
- Water: city or well; sewer: city, septic, or private treatment system, with permits and testing
- Master-metered vs. individually metered utilities, and whether utility costs are billed back
- Roads, drainage, and lot condition
- Zoning and any legal nonconforming status; rules for replacing homes on vacant lots
- State or local park licenses
- Property taxes and how they may change after the sale
- Environmental and flood risk
- Insurance availability and cost
Negotiation checklist
- No prepayment penalty
- Balloon long enough to improve the park and refinance
- Option to extend the balloon for a fee
- Grace period and written notice before default
- Seller agrees to subordinate to a future first loan, if needed
- Clear list of included equipment and homes
Reading the amortization schedule
Ask your attorney or servicer for a full amortization schedule before you sign. It lists every payment and shows how much goes to interest and principal and the remaining balance. In the hypothetical example above, the first payment's interest is $800,000 × 0.005 = $4,000.00, so only $1,154.41 of the first $5,154.41 payment reduces principal. That is why the balance after five years is still about $719,457. Knowing this ahead of time keeps the balloon from being a surprise.
Ways to adjust the structure
Interest-only period
Lower payments in the first year or two while you fill lots or fix infrastructure, then switch to amortizing payments.
Longer balloon
Gives you more time to improve income before you refinance. Sellers may want a higher rate or price in exchange.
Seller second + bank first
A bank lends most of the price, and the seller carries a smaller second note that lowers your cash at closing.
Wraparound
If the seller still has a loan, a new note wraps around it. This needs careful legal drafting and servicing.
Common mistakes to avoid
- Negotiating price only. Terms often matter more to your cash flow than price.
- Short balloon with no plan. If you can't refinance in time, you could lose the park.
- Not verifying the rent roll. Match lot rents to bank deposits, not just to a spreadsheet.
- Ignoring park-owned homes. They add income but also repairs, vacancies, and management.
- Missing utility costs. Master-metered water and sewer can be one of the biggest expenses in a park.
- Handshake documents. Always use properly drafted and recorded documents.
Planning your exit from the note
From the first day, plan how you will pay off the seller. Most buyers either refinance with a bank once the park has a stronger track record, sell the park, or negotiate an extension. Keep clean financial records, raise occupancy, address deferred maintenance, and talk to lenders well before the balloon date so you know what they will require.
Your closing team
Real estate attorney
Drafts or reviews the purchase agreement, notes, and security documents, and explains how your state's rules apply.
Title or closing company
Searches title, handles the money, records the deed and liens, and issues title insurance.
CPA
Advises on entity setup, taxes, and how to structure the purchase price between land, improvements, and equipment.
Inspectors
Septic and well specialists, electricians, and general inspectors who know rural and park infrastructure.
Insurance agent
Quotes property and liability coverage for parks and campgrounds before you commit.
Loan servicer
Collects payments and keeps records for any seller or existing financing.
A realistic timeline
Every deal is different, but most follow the same rhythm. Finding and building trust with a seller can take weeks to many months. Once terms are agreed, the purchase agreement and due diligence period often take several weeks, depending on how quickly the seller provides documents and how long inspections, surveys, and title work take. Build in time for surprises, and never let a deadline push you into skipping due diligence.
Glossary
- Amortization
- The schedule that spreads repayment of a loan over time.
- Balloon
- A lump sum due before the loan is fully amortized.
- Debt service coverage ratio (DSCR)
- Net operating income divided by annual loan payments.
- Subordination
- When a lender agrees its lien ranks behind another lender's lien.
- Lot rent
- The monthly rent residents pay for the space their home sits on.
How it works with ParkSourced
- Join the buyers list. Tell us how you buy (cash, creative finance, or either) and which park types you want through the private access form.
- We source off-market. We reach out directly to park owners and look for sellers open to terms like the one in this guide.
- We do a first-pass review. Before a deal goes out, we gather what the seller provides, such as the rent roll, utility setup, and the proposed terms, so you can decide quickly whether it fits.
- You get first look. List members see the deal before it goes anywhere else. If it fits, we connect you with the seller.
- You and your team close. You run your own due diligence and close with your own attorney and title or closing company. ParkSourced does not give legal, tax, or financial advice.
Questions? Email parksourced@gmail.com.
Frequently asked questions
How much down payment do sellers want?
There is no standard number. It depends on the seller's goals, the park's condition, and the other terms.
Mortgage or deed of trust, what's the difference?
Both secure the note against the property. Which one is used, and how foreclosure works, depends on the state. Your attorney will use the right one.
Can seller financing be combined with a bank loan?
Yes, if the bank allows it. The bank holds the first lien and the seller carries a second note. Disclose all financing to every lender.
What if I can't pay the balloon?
You'd need to refinance, sell, or negotiate an extension. Negotiate an extension option up front and start planning at least a year early.
Who services the payments?
You can pay the seller directly, but a third-party servicer keeps clear records and statements for both sides.
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