Today's track: "Remember Me If I Forget" — Charlie Parr

Thirty-nine point four percent.

That's the share of American homeowners who own their house outright — no mortgage, no lien, nothing. Census, 2024 five-year estimates, up from 34.4% a decade earlier.

Sit with that for a second, because it reframes this entire market. Four out of every ten owner-occupied houses in this country have no bank attached to them. The owner is the bank already. They just haven't been asked to act like one.

Rates are sitting at 7%+. Every point they climb, the case for going around the bank gets stronger — for the buyer who can't qualify at that number, and for the seller who's about to hand a fifth of their gain to the IRS in a single April.

Today is the tool that solves both of those at once.

Here's the whole thing in one sentence: instead of the buyer getting a loan from a bank to pay the seller, the seller becomes the bank and the buyer pays the seller.

That's it. That's seller financing. Everything else is documentation.

The paper is a note and a mortgage, and in Kentucky it's a mortgage, not a deed of trust.

The promissory note is the promise to pay — amount, rate, term, payment, what happens on default. The mortgage is the lien that secures it, and it gets recorded with the Jefferson County Clerk. Kentucky requires the recorded mortgage to state the loan amount, the maturity date, the lender's name and address, a source-of-title statement, and the preparer's name and signature.

Record it. I'm going to say that twice today.

KRS 382.270 says no mortgage conveying legal or equitable title is valid against a purchaser for value without notice, or against creditors, until it's acknowledged and recorded. And "creditors" there means all creditors, whether or not they've got a lien yet. An unrecorded seller mortgage is a handshake with a stamp on it. Pew found 10% of land contract buyers said their contract was never recorded and another 12% didn't know either way.

Now the reason sellers actually say yes, which is almost never the interest rate.

It's the tax bill.

Under IRC Section 453 — IRS Publication 537 if you want to read it yourself — an installment sale is a sale where you receive at least one payment after the tax year of the sale, and the gain gets reported under the installment method unless you elect out. You report gain as you receive it, using the gross profit percentage, on Form 6252.

Translated: a seller with a paid-off rental and a $180,000 gain can take that gain across fifteen years instead of stacking it into one. That's not a small difference. That's frequently the whole conversation.

Here is the single most useful fact in this entire email if you're an investor.

Reg Z — the whole apparatus, ability-to-repay, the loan originator rules, all of it — does not apply to business-purpose credit.

12 CFR 1026.3(a) exempts credit extended primarily for a business, commercial or agricultural purpose. And the official commentary is explicit: credit extended to acquire, improve or maintain rental property that is not owner-occupied is deemed business purpose, regardless of the number of units. The occupancy test is 14 days — if the owner expects to occupy more than 14 days in the coming year, it's not non-owner-occupied.

So: seller-financing a rental house to an investor who won't live in it sits outside TILA entirely. No ability-to-repay determination. No balloon restriction. No Reg Z loan-originator rules.

One caveat so nobody over-reads that: it's Reg Z that steps aside. State licensing is a separate regime with its own triggers — don't assume the business-purpose exemption carries over to every rule with the word "originator" in it.

Seller-financing a house to somebody who's going to live in it is a completely different legal animal. Same house, same seller, different buyer, different universe of rules. Get that distinction right and most of the confusion on this topic evaporates.

When it is a consumer deal, there are two doors.

The three-property exclusion, 12 CFR 1026.36(a)(4): three or fewer properties in any 12-month period, each owned by the seller and securing the financing, the seller didn't build the house in the ordinary course of business, the financing is fully amortizing — meaning no balloon — fixed rate, or adjustable only after five or more years with reasonable annual and lifetime caps tied to a widely available index, and the seller determines in good faith that the buyer has a reasonable ability to repay.

The one-property exclusion, 1026.36(a)(5): one property in twelve months, natural person or estate or trust, same ownership and construction conditions, a repayment schedule that doesn't produce negative amortization — which means a balloon is allowed here — and no express ability-to-repay determination required.

Read those two again and notice the difference, because everybody gets it backwards. If you want a balloon on a consumer deal, you're in the one-property lane. Three properties buys you volume and costs you the balloon.

And if you fall outside both, you're in licensed-originator territory and the fix is to run the loan through an RMLO.

Land contracts. This is the Kentucky section, and it's the reason I wrote this issue.

A land contract — contract for deed, installment land contract, same thing — is where the seller keeps legal title until the buyer finishes paying. The pitch, everywhere, is always the same: if they stop paying, you keep the house and everything they've paid. No foreclosure. Fast.

In Kentucky that is not true, and it hasn't been true since 1979.

Sebastian v. Floyd, 585 S.W.2d 381. The Kentucky Supreme Court held that forfeiture clauses in installment land contracts are not enforceable as written. The seller holds a vendor's lien and is treated as an equitable mortgagee. And the holding, in the court's words: the seller's remedy for breach of the contract is to obtain a judicial sale of the property. The buyer's equity comes out of the proceeds.

Still good law. The Court of Appeals applied it in Slone v. Calhoun in 2012 — "the forfeiture provisions set forth in the agreement are invalid as a matter of law," and "the only judicial remedy to resolve the alleged breach of the land contract between the parties is a judicial sale of the property."

So in Kentucky, a land contract gets you exactly the same remedy as a mortgage. You still foreclose. You just do it holding a worse document.

You lose clean recording, clean title, clean tax characterization, and you keep every ounce of the foreclosure timeline. And Kentucky foreclosure is judicial only — a full court process, master commissioner, two impartial appraisers, and if it sells below two-thirds of appraised value the borrower gets a right of redemption. Redemption rights is a whole other ball game!

Indiana is next door and went the same direction, via Skendzel v. Marshall in 1973 — land contracts treated as secured transactions requiring judicial foreclosure, with narrow exceptions for abandonment and for a buyer who's paid very little and defaults early.

Which makes this next number remarkable: Indiana recorded 31,431 land contracts between 2005 and 2024 — 90% residential, sixth-most in the country despite being 17th in population, with 1,098 in 2024 alone. Median interest rate 7.0% against 6.1% for mortgages. Median down payment 4.8% against 7.4%. Median land contract home price $122,313 against a statewide median of $207,512.

That's your neighbors across the river, and it tells you two things. There is enormous unmet demand for owner-financed entry-level housing. And it is being served by a document with a documented record of harm — 14% of land contract buyers had balloon payments versus under 1% of mortgage borrowers; a quarter said the home needed major repairs; nearly half got no inspection; 73% were paying the property taxes.

The CFPB said this directly in an August 2024 advisory opinion — contracts for deed are generally credit under TILA, and ones secured by a dwelling are generally residential mortgage loans under Reg Z, even where state law doesn't call them mortgages.

Then the Bureau withdrew that opinion in May 2025, along with dozens of other guidance documents. So it isn't binding guidance anymore, and I'm not going to pretend otherwise. But the statute it was reading didn't change. I wouldn't build a business on the theory that a contract for deed escapes Reg Z because the memo saying so got pulled.

Wraparound mortgages, briefly and honestly.

A wrap is where the seller carries a note that wraps around their existing mortgage — buyer pays seller, seller keeps paying the bank. It's how you sell a property with a 3% loan on it without paying it off.

The issue is the due-on-sale clause, 12 U.S.C. 1701j-3: a provision authorizing a lender, at its option, to accelerate if the property is sold or transferred without written consent. The Garn-St Germain exemptions exist — subordinate liens, death of a joint tenant, transfer to a relative on death, transfer to a spouse or children, divorce decrees, leases of three years or less without a purchase option, transfers into an inter vivos trust where the borrower stays a beneficiary.

An ordinary arm's-length sale on a wrap fits none of them.

What that means precisely: acceleration is the lender's contractual option, not a legal penalty and not a crime. It can happen. Practitioners mitigate with third-party loan servicing so payments are documented and never late, naming the underlying lender as loss payee on the hazard policy, disclosing in writing to the buyer that the underlying loan exists and can be called, and keeping reserves to refinance if it is.

What I won't tell you is that it never happens. Nobody has data on how often lenders accelerate, and a prediction isn't a legal fact.

The objections, and these are the ones I actually hear.

"I need all my cash now." Then don't discount the price — make the note salable. First position, recorded, documented down payment, a few seasoned payments. There's a real market for seasoned owner-financed paper. Industry data counted roughly $29.5 billion in seller-financed notes across 87,212 owner-financed transactions in 2025, averaging around $272,856 at 76% loan-to-value. That's vendor data, not Census, so take it as directional — but the market exists and a well-papered note is a liquid asset.

"What if you stop paying?" In Kentucky, the honest answer is a court process — judicial foreclosure through the master commissioner, appraisal, sale, possible redemption. Six to eighteen months is realistic. Which is why their actual protection is the down payment and the equity cushion, not the paperwork. Say that. A seller who understands the real risk and takes the deal anyway stays in the deal.

"Why would I be the bank?" Because the bank's rate is 7%+ and the bank didn't get to pick the borrower. You do.

"My accountant says take the cash." Don't argue — reframe. Section 453 spreads the gain, you can elect out, have them run both. Half the time the accountant comes back on your side once they see the recapture math.

"What about my existing mortgage?" If they're free and clear, no issue, and four in ten are. If they're not, you're in wrap or subject-to territory and that's in another newsletter coming up.

"What if I need the money in five years?" Balloon — and now check which lane you're in. Business purpose, no restriction. One-property consumer, balloon allowed. Three-property consumer, fully amortizing only.

How to find the four in ten.

Free-and-clear owners are identified by the absence of a recorded mortgage in the Jefferson County Clerk's land records, cross-referenced against PVA ownership and assessment data. The filter that works: out-of-county mailing address on the tax bill, deed recorded fifteen-plus years ago, no mortgage recorded since.

One caution on that fifteen-year filter, and I mean this. A lot of those owners are older, and a terms offer is a complicated instrument with a long tail. Insist they sit down with your attorney before signing anything, this is very important! If they won't, walk away from the deal.

Then: long-tenure absentee landlords, tired landlords with code cases or eviction filings, raw land owners — where financing doesn't exist so terms are the only path — and expired listings, where the seller has already proven they'll move on price.

And the easiest one nobody runs: search MLS remarks for "owner financing," "seller financing," "contract for deed," "owner will carry." Those sellers have already said yes. They're just waiting for somebody to ask properly. I’ve got you covered in the PS section. 🤘

This is where the two-option offer comes from.

When I send a letter of intent, the seller gets choices. Option one is cash/hard money a real discount, fast close, certainty. Option two is terms — a substantially higher price, a modest down payment, and a note that pays them monthly and spreads the tax.

Same property. Same week. Same buyer. Two different answers to what do you actually need.

And the thing I've learned doing this for thirteen years: when the terms option is priced right, most sellers take it. Not because they got talked into it. Because it's the one that fits. They wanted the price, we wanted the terms, and neither of us had to lose for the other one to win.

You can't do that with one tool.

A clean house, no rehab needed, seller can't take your cash number. What do you do?

Nobody walked. That's the whole week working. And almost a third of you said "offer terms" — which is exactly where today goes. When the seller can't take your cash number, stop arguing about the price and start talking about how they get paid.

Results in tomorrow's issue.

Today's list is the four-in-ten: Jefferson County owner-occupied and absentee properties with no recorded mortgage, filtered to long-tenure owners — plus every active MLS listing in our market whose remarks already mention owner or seller financing.

That second one is the shortest path to a deal in this entire week. Reply "CARRY" and I'll send both today.

New here this week? Every morning I screen the whole Louisville MLS and rank the five best deals and the five most ripe for a lowball, with my number on each one. Readers get it by replying "FIVE". Zero cost, zero pitch — I just like sending people good numbers. And if there aren't five great ones, I don't send five.

With Enthusiasm,
Rob Bergeron

Owner–Realtor at Award-Winning Winner Realty
Winner Realty | OffMarket.deals | Property Partner Data Company

Schedule time to discuss your goals, bottlenecks, or whatever’s on your mind — book me here.

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