Seller Financing in Utah: The Complete Legal Guide (2026)

Seller financing in Utah means the seller acts as the bank. The buyer takes title at closing, signs a promissory note, and gives the seller a trust deed on the home. If you still have a mortgage, the first thing to know is the due-on-sale clause. Your lender can demand full payment when you sell, even on a wrap.

How does seller financing work in Utah?

In a Utah seller-carry, the seller lends part of the price and the home secures the loan. The buyer pays a down payment, signs a note for the rest, and pays the seller monthly.

The security instrument is a trust deed. A trust deed conveys the property to a trustee to secure the buyer's promise to pay (Utah Code § 57-1-19). The buyer gets the deed and the title at closing. The seller gets a recorded lien and a stream of payments.

Here is a plain example. You sell a home for $400,000. The buyer puts $40,000 down. You carry a $360,000 note at 7% with payments figured over 30 years. The monthly principal and interest payment is about $2,395.09. The buyer also pays property taxes and insurance, usually through a servicer or directly.

Three parties typically touch the deal:

• The buyer, who owns the home and makes the payments.
• The seller, who is now the lender and the beneficiary of the trust deed.
• The trustee, who holds the power of sale if the buyer defaults.

A title company usually closes the sale, records the documents, and issues title insurance. A note servicer can collect the payments and keep the records. Both are optional in theory. In practice, both make the deal much easier to live with for years.

Who pays property taxes and insurance?

The buyer usually pays both, because the buyer owns the home. The note and trust deed should say so in plain words. They should also say what happens if a tax bill or premium goes unpaid.

What typically happens in a well-run deal:

• The buyer's monthly payment includes an amount for taxes and insurance, held by the servicer.
• The servicer pays the county tax bill and the insurance premium when they come due.
• The seller is named on the insurance policy, so a claim check can't go only to the buyer.
• The seller gets a copy of each paid tax bill and each renewal.

That is practice guidance, not a statutory rule. It matters because an unpaid tax bill can put a lien ahead of yours, and an uninsured fire can erase your security.

How are the payments taxed?

A seller who receives payments over time can often report the gain as the payments arrive. Under the installment method, each payment is multiplied by the gross profit percentage, with depreciation recapture reported in the year of sale (26 U.S.C. § 453; IRS Pub. 537). The interest you receive is ordinary income. Talk to your tax preparer before closing, because the structure of the note changes the tax picture.

You can run your own price, down payment, rate, and balloon in the seller-carry calculator.

Is seller financing legal and common in Utah?

Yes, seller financing is legal in Utah, and the state publishes its own form for it. The Seller Financing Addendum is a state-approved form effective October 20, 2021 (Seller Financing Addendum (state-approved form, Oct. 20, 2021)).

Utah agents use that addendum with the standard purchase contract. It gives the parties a place to set the price, down payment, rate, term, and security. That is a strong signal the practice is ordinary, not fringe.

"Legally allowed to" and "actually goes well" aren't always the same thing, though. A seller-carry is a long relationship with a stranger who owes you money. The deals that go well share a few traits:

• A real down payment, so the buyer has something to lose.
• A written note and trust deed drafted for this deal, not a generic template.
• A recorded trust deed, so your lien is on the public record.
• A servicer or at least a clean payment record.
• An exit plan for the buyer, usually a refinance within a set number of years.

The deals that go badly usually skipped one of those steps. The most common gap is a missing or vague note. The second is a seller with an existing mortgage who did not plan for the due-on-sale clause.

Should I use a note and deed of trust, an all-inclusive trust deed, or a contract for deed in Utah?

Most Utah seller-carries should use a note and trust deed, because the buyer gets title and the seller gets a clear foreclosure path. The other three instruments each fit narrower situations, and each carries different risks.

The addendum itself offers two choices: "Note and Deed of Trust" or "Note and All-Inclusive Deed of Trust" (Seller Financing Addendum § 1). A contract for deed and a lease option are outside that form. The current state-approved forms list has no contract-for-deed form, lease-option form, or subject-to form (Utah Admin. Code R162-2f-401f).

A few points behind the table:

• No Utah statute regulates AITDs or wraps (Utah Code Title 57, Chapter 1). The deal depends on your documents.
• No Utah statute governs contract-for-deed forfeiture (Utah Code Title 57, Chapter 1). Court decisions and the contract's words control.
• The federal exemption list does not include a wrap, a contract for deed, or a lease with an option (12 U.S.C. § 1701j-3(d)).

If you are unsure which one fits, the which-instrument tool asks a few questions and points you to a starting choice. The instrument guide goes deeper on each option, including what a contract-for-deed buyer gives up.

How much down payment and what interest rate should I set?

Utah sets no minimum down payment and no usury cap on a written, agreed rate. The parties to a lawful contract may agree on any rate, and the legal rate without an agreement is 10% a year (Utah Code § 15-1-1).

That freedom means the terms are a negotiation, not a formula. This guide does not quote a "typical Utah" down payment or rate, because no reliable public data exists for private deals. Worked examples are more useful.

Take the same $400,000 home, a 7% rate, 30-year amortization, and a five-year balloon:

The bigger down payment does three things. It lowers the buyer's monthly payment by about 11%. It shrinks the balloon the buyer must refinance by about $37,653. And it gives you more equity cushion if you ever foreclose.

Some practical points on rate:

• Price the risk. A buyer who can't qualify at a bank is a riskier borrower. The rate usually reflects that.
• Watch the federal minimum for tax purposes. A note charging less than the applicable federal rate can have interest imputed for tax purposes (26 U.S.C. §§ 1274, 483; Rev. Proc. 2025-32). The current rates are below.
• Keep it fixed if you can. A fixed rate is simpler to service and fits both Reg Z seller exclusions, covered in the next section.
• Put the late fee and default terms in writing. Outside the Consumer Credit Code, late fees and prepayment terms are set by contract (Seller Financing Addendum § 2.1).

For a deeper look at rates, read what interest rate you can charge.

Do I need a mortgage license, and can I include a balloon payment?

Most one-time Utah sellers do not need a mortgage license. Federal rules give sellers two exclusions from the loan-originator definition, and Utah's licensing act exempts a seller who takes back a trust deed.

The two Reg Z seller exclusions

The federal rules offer two paths. Both require that you own the property and are not the builder.

1. The one-property exclusion. A natural person, estate, or trust financing one owned property in 12 months qualifies. The loan can't negatively amortize, a balloon is permitted, and no ability-to-repay determination is required. The rate must be fixed, or adjustable only after five or more years with reasonable caps (12 CFR § 1026.36(a)(5)).
2. The three-property exclusion. Any person, including an LLC, financing three or fewer owned properties in 12 months qualifies. The loan must fully amortize with no balloon. You must determine in good faith that the buyer can repay. The rate must be fixed, or adjustable only after five or more years with reasonable caps (12 CFR § 1026.36(a)(4)).

These exclusions take you out of the loan-originator definition. They do not take you out of the Truth in Lending Act generally (12 CFR § 1026.36).

A separate test decides whether you are a TILA "creditor" at all. That happens only after more than five dwelling-secured consumer loans in the current or preceding calendar year (12 CFR § 1026.2). A seller below that line is not required to give a Loan Estimate or Closing Disclosure (12 CFR § 1026.2; CFPB TILA-RESPA fact sheet).

What this means for a balloon

The $360,000 example above has a five-year balloon. If you are an individual selling one home this year, the one-property exclusion permits that balloon. If you sell through an LLC, or you finance a second and third property this year, the three-property exclusion is your likely path. That path does not allow a balloon. The balloon payment article walks through the choices.

Utah's seller exemption

Utah's Residential Mortgage Practices and Licensing Act exempts the seller who takes back security for the sale price. The exemption covers a person who "is the seller of real property" and receives a deed of trust "as security for a separate money obligation" (Utah Code § 61-2c-105(2)(i)). That exemption has no numeric transaction cap.

A separate Utah exemption covers a person lending their own money for their own investment who is not in the business of making such loans (Utah Code § 61-2c-105(2)(h)).

The rules interact, and the answer depends on your facts. The licensing checker asks six questions and shows which exclusions may fit. The Dodd-Frank and SAFE Act guide covers the full picture.

What does the Utah Seller Financing Addendum cover?

The Seller Financing Addendum sets the business terms of the carry inside the purchase contract. It does not replace the note or the trust deed. Those are separate documents drafted for closing.

Here is what the verified sections do:

1. Section 1, the security. You pick "Note and Deed of Trust" or "Note and All-Inclusive Deed of Trust" (Seller Financing Addendum § 1).
2. Section 2.1, payments and prepayment. Principal may be prepaid without penalty. The seller provides an amortization schedule, the total interest, and the APR (Seller Financing Addendum § 2.1).
3. Section 4, an all-inclusive deed of trust. If you use one, the seller must provide evidence within 10 days that the underlying payments are current (Seller Financing Addendum § 4).
4. Section 5, the underlying loan. The seller discloses the underlying loan documents. If a due-on-sale clause is triggered, the buyer's payoff is credited to the note's principal (Seller Financing Addendum § 5).
5. Section 8, title insurance. The addendum includes an option for a lender's title insurance policy to protect the seller's lien (Seller Financing Addendum § 8).
6. Section 9, tax reporting. The buyer and seller exchange Social Security or taxpayer ID numbers so interest can be reported (Seller Financing Addendum § 9).

The addendum also carries its own warning. It says real estate brokers are not qualified or licensed to ensure the financing complies with the law (Seller Financing Addendum).

Agents also can't change the boilerplate. Licensees may not alter state-approved form language and must use approved addenda (Utah Admin. Code R162-2f-401b). Custom terms, like a late fee, a default rate, or wrap servicing rules, belong in attorney-drafted documents.

Agents who want a section-by-section walk-through can read how to fill out the addendum.

How does closing and recording work, and who can be the trustee?

A Utah title company usually closes the sale and records the deed and the trust deed the same day. Recording protects the seller's lien against anyone who comes later.

Why recording matters

Recording a document gives constructive notice of its contents to everyone (Utah Code § 57-3-102). An unrecorded document is void against a later good-faith purchaser who records first (Utah Code § 57-3-103).

In plain terms: if your trust deed sits in a drawer, the buyer could borrow against the home or sell it. A later lender who records first could take ahead of you. Record at closing.

Recording costs are modest. The Utah County Recorder charges $40 per document and $5 per certification (recorder fee schedule, checked 2026-09-25). The office is at 100 East Center St., Suite 1300, Provo, UT 84606, 801-851-8179.

What closing usually looks like

1. The addendum and purchase contract are signed, with the carry terms filled in.
2. An attorney drafts the note and the trust deed (or all-inclusive trust deed) to match.
3. The title company runs title, prepares a settlement statement, and gets closing instructions.
4. Everyone signs. The buyer's deed and the seller's trust deed go to the county recorder.
5. The title company issues the owner's policy and, if chosen, the lender's policy for the seller.
6. The servicer, if you use one, sets up the loan and sends the buyer a payment coupon or portal.

Who can be the trustee

Utah limits who can serve as trustee. The list includes Utah attorneys with a Utah office, Utah-licensed title insurers and agencies, and certain banks and trust companies. Only an active Utah State Bar member with a Utah office, or a licensed title company with a Utah office, may exercise the power of sale (Utah Code § 57-1-21).

A seller should not name a friend or relative as trustee. That trustee couldn't run a sale. If the trustee can't sell, the fallback is to foreclose judicially as a mortgage (Utah Code § 57-1-23). A court foreclosure usually takes longer and costs more.

What happens if the buyer stops paying?

If the buyer defaults on a Utah trust deed, the seller can foreclose through a trustee's sale without going to court. The steps and waiting periods are set by statute, and the minimum is several months.

1. Before the notice of default
   30-day pre-notice (owner-occupied)
   On an owner-occupied residential loan, the beneficiary or servicer sends a written notice giving at least 30 days to cure.
2. Day 0
   Notice of default recorded
   The trustee records the notice of default in the county where the home sits.
3. Months 0 to 3
   Reinstatement window
   The buyer can reinstate by paying the amount then due, not the accelerated balance, plus costs and fees.
4. After 3 months
   Notice of sale
   The trustee mails, posts, and publishes the notice of sale.
5. Sale day
   Trustee's sale
   The home is sold at public auction. The seller may credit-bid. There is no redemption afterward.
6. Within 3 months after the sale
   Deficiency deadline
   Any deficiency suit must be filed within three months, and the judgment is capped by fair market value.

The legal anchors for those steps:

• The 30-day pre-notice applies to owner-occupied residential loans, with no small-lender exemption (Utah Code § 57-1-24.3).
• At least three months must pass after the notice of default before a notice of sale (Utah Code § 57-1-24).
• The buyer may reinstate within three months by paying the amount then due, plus costs and fees actually incurred (Utah Code § 57-1-31).
• The trustee's deed conveys title without right of redemption (Utah Code § 57-1-28).
• A deficiency judgment is limited to the debt minus the home's fair market value at the sale date (Utah Code § 57-1-32).

You can plug in a default date and see the dates in the foreclosure timeline tool. The default and foreclosure guide covers each step, including what to do before you file anything.

On a wrap, default has a second layer. You still owe your own lender every month, whether the buyer pays or not. That is one more reason the guide to selling with a mortgage spends a full section on reserves and servicing.

What does a Utah attorney do for a flat fee?

For $750, a Utah attorney drafts the documents for a standard seller-carry and reviews the terms with you. The fee is flat for the listed work, and anything outside it is quoted before it starts.

The flat fee includes:

• A promissory note drafted for your terms.
• A trust deed or all-inclusive trust deed, ready to record.
• Review of the Seller Financing Addendum and purchase contract terms.
• A closing-instruction letter to the title company.
• A servicer setup letter.
• One round of revisions.
• A 30-minute planning call.

Some work is billed hourly instead, and you hear about it before it starts:

• Negotiating with the other side's attorney.
• Requests for the underlying lender's consent.
• Multi-property or entity-structured deals.
• Litigation or default work.

The first 15-minute call is free. Bring the price, the down payment, the rate you have in mind, and the addendum if you have one. The services page has the full scope.

A good attorney conversation usually covers four questions. Which instrument fits? Do the Reg Z exclusions fit your facts? What happens to your existing loan, if you have one? And what happens on the day the buyer misses a payment?

What Greg would tell you

Before you pick a rate, decide what you'll do if the buyer misses three payments in a row, because that plan shapes every other term. Put the note and trust deed in writing for this deal and record the trust deed at closing. If you still have a mortgage, we talk about the due-on-sale clause first and the interest rate second.

This site is for general information about Utah law and is not legal advice. Using it does not create an attorney-client relationship. Every transaction is different — talk to an attorney about yours. Attorney advertising.