The rules of the desk.

Florida charges no state income tax, so installment-sale taxation under IRC §453 is entirely federal. That keeps the seller conversation to one tax authority and one Form 6252. The state also has a deep pool of free-and-clear owners — retirees holding land, small multifamily, and SFR rentals outright — which is the only inventory this structure should touch.

The cost of that inventory is time. Florida is a judicial foreclosure state. There is no self-help, no power-of-sale shortcut, and no automatic reversion of title. A contested foreclosure can run 12 to 36 months depending on the county. Every other rule on this desk — third-party servicing, tax escrow, title insurance, personal guaranty, AFR-compliant rates — exists because the remedy is slow.

Zillow’s owner-financing chip is a keyword. Most of those hits are agents tagging the listing, a land contract, or “seller may consider.” The hunt is the share of owner-occupied units with no mortgage — Census ACS B25081. Florida sits at 44.2% free-and-clear on the 2024 5-year. Inland retirement counties run hotter. Orange and Osceola run leveraged.

Three funnels, not one: listed OWC (read the remarks, walk on contract for deed), owners who can say yes (this heat, then the appraiser roll, then a pitch), and recorded purchase-money mortgages (comps, not inventory). Direct mail to free-and-clear owners is still how most true-carry files start.

On a Purchase Money Mortgage the buyer takes title at closing by warranty deed and the seller records a mortgage lien. On a land contract / contract for deed the seller keeps title until the last payment. In Florida that distinction does not buy you a faster default remedy. Courts recharacterize land contracts as equitable mortgages and send you through judicial foreclosure anyway.

You do gain something by using the land contract: mess. Clouded title, harder senior-lender cooperation, and a file that looks like a workaround. Transfer title, record the PMM, and let the public records show priority the way a DSCR lender and a title company already know how to read.

• Warranty deed to buyer at closing — no contract for deed.
• Record the seller's mortgage in the county where the property sits.
• Owner's and lender's title insurance in place before funds move.
• Intercreditor / subordination with the senior lender is a closing condition, not a follow-up.

Note #1 is a third-party DSCR or hard-money loan in first position. Note #2 is a single seller-carried purchase-money note in second position, priced at or above the applicable mid-term AFR, interest-only, with a five-year balloon. Cash down can be $0. The equity kicker is how the seller is paid for taking second position and for spreading the tax.

This is the cleanest zero-down path because the first lender's underwriting does the credibility work. The seller is not being asked to believe a story. They are being asked to sit behind a file a professional lender already bought.

• Do not run this against an existing institutional mortgage. Free-and-clear, or pay it off at closing.
• Subject-to and wraparound financing are attorney-required, not menu items. Due-on-sale can accelerate the entire underlying loan.
• A 0% Note #2 is not a structure. It is an imputed-interest problem under IRC §§1274 and 7872.

Option A — Back-end participation (default)

Seller receives a defined percentage of net sale or refinance proceeds above a threshold. Easiest for a seller's attorney to evaluate and the cleanest fit with installment-sale treatment. Documented as a separate Participation Agreement, recorded as a covenant tied to the property, not as a third lien.

Option B — Appreciation-sharing note

The balloon on Note #2 is itself a formula based on appraised value at maturity. Avoids a separate participation agreement; requires a carefully defined appraisal mechanism written into the note.

Option C — Recorded option to participate

Strongest recorded protection. Most attorney-intensive and slowest to negotiate.

Option D — Cash-flow kicker

Tied to NOI above a coverage threshold. Fits multifamily better than land or SFR. Requires ongoing financial reporting and an audit right.

Trigger events for Option A are the earliest of a third-party sale, a cash-out refinance, or maturity of Note #2. If the senior lender forecloses, the kicker does not survive as a separate claim. Recovery in that scenario is limited to Note #2 principal and accrued interest. That trade-off belongs in the intercreditor, in writing.

A five-year note sits in the IRS mid-term AFR bucket. The stated rate on Note #2 must meet or exceed the mid-term AFR published for the month of closing. Quote a stale percentage and you can walk into imputed interest, which recharacterizes part of 'principal' as interest and can undercut the §453 deferral the seller was sold.

Depreciation recapture under §1250 is recognized in full in the year of sale. It cannot be deferred under installment-sale rules and can create a meaningful ordinary-income event at closing even on a carry.

A seller who wants a full §1031 needs cash through a qualified intermediary. A current-pay second is installment treatment — a different exit. If they want the exchange, they list. Do not invent a 1031-friendly stack.

• Adjusted cost basis and gross-profit percentage for Form 6252.
• §1250 recapture recognized in the year of sale.
• Note #2 rate ≥ applicable AFR for the month of closing.
• Whether kicker payments are contingent installment-sale proceeds under Treas. Reg. §15a.453-1(c).
• If the seller asked for a 1031: they list through a QI, or they carry. Not both on the same property.

If the buyer will live in the property as a primary residence, ability-to-repay and balloon-payment restrictions may apply. Natural-person seller-financer exemptions exist, with conditions (including a cap on the number of properties financed per year) that were modified by the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act. One exemption is not the other. Confirm with Florida counsel which exemption, if any, applies to the specific file — especially since a five-year balloon may or may not fit the safe harbor you think you're in.

If the buyer is an LLC or corporation and the property is a residence, the natural-person exemption is lost. Don't paper around that.

Owner-occupied office and live-work do not auto-clear occupancy. Counsel must confirm business-purpose before the file is treated as CRE. Until then, keep the Dodd-Frank caution on and do not score Fits on a 1–4 DSCR shop.

On usury, a mid-term AFR rate is far below Florida's caps under Chapter 687 — generally 18% for loans under $500,000 and 25% at or above. Usury is not the practical risk. AFR is. Have the attorney cite the specific applicable subsection in the final documents rather than relying on a memorized number.

The balloon on Note #2 needs a Florida-compliant balloon disclosure because the final payment exceeds twice the regular monthly payment. Confirm the controlling statute and required language for the deal's structure and county; do not paste a citation from memory.

• Deed documentary stamps: $0.70 per $100 of consideration statewide.
• Miami-Dade single-family dwelling: $0.60 per $100 (surtax does not apply).
• Miami-Dade non-single-family: $1.05 per $100 ($0.60 + $0.45 surtax).
• Mortgage / note stamps: $0.35 per $100 of the obligation, capped at $2,450 per instrument.
• Nonrecurring intangible tax: $0.20 per $100 of the mortgage, uncapped.
• Custom in most Florida counties is that the buyer pays these at closing. Confirm with the closer.

• Full title search plus owner's and lender's title insurance.
• Seller represents the property is free and clear — and the deal dies if an undisclosed mortgage turns up.
• Property insurance with both the senior lender and the seller named as mortgagee / loss payee in priority.
• Tax and insurance escrow through the servicer so a tax certificate cannot prime the second.
• Licensed third-party servicing of Note #2. No kitchen-table collections.
• Personal guaranty from the individual behind a buyer LLC.
• Subordination / intercreditor: seller expressly subordinate; default notices; right (not duty) to cure the first; advance written notice before seller starts its own foreclosure; written acknowledgment that a senior foreclosure can extinguish the second.
• Seller's independent counsel reviews. Buyer's Florida real estate attorney drafts. Two lawyers, not one.

• Clean title search; owner's and lender's policies bound.
• Senior lender written commitment consistent with the term sheet.
• Intercreditor executed by the senior lender and the seller.
• Seller's CPA confirmation letter: AFR, installment sale, recapture, kicker treatment.
• Verified rent roll, leases, or pro forma supporting stated NOI.
• Promissory Note, Purchase Money Mortgage, Participation Agreement, Personal Guaranty — drafted by Florida-licensed real estate counsel.
• Seller's independent attorney approval.
• Third-party servicer engaged.
• Hazard (and flood, if applicable) insurance bound, both lenders named.
• Documentary stamps and intangible tax funded.
• Balloon disclosure in the note.
• This term sheet is non-binding. The closing set is the contract.