Taking the Cash Offer Feels Safe. The Math Says Otherwise.

Every real estate trainer in Texas tells sellers to take the cash, close fast, and move on. That advice costs sellers more money than bad tenants ever will.

When a seller carries the note, they become the bank. They set the rate, collect interest, and name the price. Cash buyers discount because cash is supposed to buy a haircut. Seller-financed buyers pay more because they’re getting terms they can’t find at any lender window.

Run the numbers on a straightforward $200,000 property:

• All-cash close: A buyer offering cash will typically push for 7–10% below list. Call it $185,000. After title, prorations, and carrying costs, the seller walks with somewhere south of $180,000.
• Seller-financed exit: Seller asks $210,000 at 8% interest, 30-year amortization, 5-year balloon. Monthly payment: $1,541. Over 60 months, the seller collects $92,460. The balloon payment at month 60 is approximately $199,600. Total received: $292,060.

That $112,000 gap is not a rounding error. That’s the difference between the price the cash buyer convinced your seller was “fair market” and what the same property actually earns on a note.

The Tax Argument Nobody Runs

Texas has no state income tax, but federal installment sale rules still matter. When you sell all-cash, every dollar of capital gain hits your return in year one. Carry the note and the IRS lets you report gain proportionally as payments come in, spread across the life of the note. A seller sitting on a rental they bought for $60,000 that’s now worth $220,000 can face a serious bracket problem in a cash year. Installment treatment spreads those gains thin across multiple tax years. Most sellers never hear it because their agent is focused on closing fast, not on what the client nets after April 15.

Wraps and What the Spread Actually Means

If there’s an existing mortgage on the property, the seller can still structure a wrap. A wrap-around note includes the underlying balance — the seller keeps paying their original lender and collects the higher note rate on the full balance. A seller on a 3.5% fixed loan who originates a new note at 7.5% pockets the spread on a balance they’re already servicing. That spread is real yield with no additional capital deployed.

Sub-to is the buyer’s version of this transaction. Sub-to is a financing method, not an exit strategy, and understanding that distinction gives both parties clarity on what actually transfers at closing. The deed moves. The existing mortgage stays in the seller’s name until the buyer refinances or sells. For either structure, use a title company and attorney that specializes in creative transactions. They’ll provide a proper agreement covering the servicing arrangement, default remedies, and notification requirements so neither side is exposed.

On the regulatory side, under Dodd-Frank’s seller financing exemption, an individual seller can carry the note on residential investment properties without holding a Mortgage Loan Originator license, up to three transactions per calendar year. That’s a statutory carve-out, not a workaround.

When Taking the Cash Is the Right Call

There are sellers for whom a fast cash exit is correct. If you have no equity, a short timeline, or you need capital immediately for another acquisition, carrying a note creates a liquidity problem you didn’t need. Seller financing is also the wrong structure when the buyer has no documented income and minimal skin in the game. A down payment of at least 10% (20% is better) is what gives the note real collateral value and makes a foreclosure outcome manageable if the buyer defaults. In Texas, foreclosure on a residential property is non-judicial, but it only happens on the first Tuesday of the month, and the lender (in this case, the seller) must post notice at least 21 days prior. Your down payment is your first line of defense during that window.

If the math doesn’t work for your situation, it doesn’t work. The conventional advice exists for a reason.

The Conversation That Doesn’t Happen

The default in Texas real estate is to move cash through title as fast as possible. That default serves buyers, lenders, and closing companies. It doesn’t always serve sellers.

Before signing a listing agreement that locks you into a 30-day close, have an agent who actually understands seller financed deals run both scenarios side by side: cash exit vs. a well-structured note. The difference isn’t a real estate strategy question. It’s a financial planning question, and most sellers never get to make it because nobody puts both sets of numbers in front of them.

At StepStone Realty, that’s the first conversation we have.