Read something that said if you originate more than a couple of owner-financed loans you become a mortgage lender and need to be licensed, and that there are rules about balloon payments on owner-occupied houses specifically. I own two rentals and might sell one on terms to the current tenant.
Is that a real thing or forum noise? It seems strange that selling my own property would need a license.
Answer
It's a real thing, and how much of it touches you depends on the number of these you do, whether the buyer will live in the house, and which state you're in. State licensing rules for seller financing vary quite a bit, so the specific count that matters to you has to come from a licensed attorney in your state.
The mechanism is worth understanding even before you get that advice. Federal consumer-protection rules around residential mortgage lending were written to catch people making loans as a business. They generally carve out room for an owner selling their own property, with the room getting narrower as you do more of them and tighter still when the buyer is going to live there as their primary residence. There are also federal provisions that limit balloon terms and impose ability-to-repay analysis on some owner-occupied seller-financed sales, again with narrow exemptions tied to volume. Selling a rental to an investor who won't occupy it sits outside a lot of that. Selling to your tenant who will keep living there sits much closer to the center of it. Confirm the current rules with an attorney before you draft anything, because these thresholds get amended.
There's a practical piece nobody mentions until it bites. If you fall into the regulated category and use a form note that doesn't comply, the consequence isn't a fine you pay and move on. It can affect your ability to enforce the note, which is the entire value of what you're holding. That's a reason to have someone competent draft it rather than to skip the sale.
Separately, ask whether your state requires the security instrument to be recorded a particular way and whether transfer taxes are due at closing. Both differ by state, and the second one occasionally changes the price you'd want to accept.