By Benjamin Finnerty (S), REALTOR® (RS-83812) with Keller Williams Realty Maui · Kīhei, Maui · 808-481-9748

Quick Answer: Seller financing on Maui usually takes the form of a purchase money mortgage or a Hawaiʻi agreement of sale, where the seller keeps legal title until the buyer pays in full (HRS §502-85). With Freddie Mac’s 30-year average at 7.32% as of October 22, 2026, it can bridge a gap, but federal lending rules and conveyance tax still apply.

I’m Benjamin Finnerty, a REALTOR® in Kīhei with Keller Williams Realty Maui. With conventional rates above 7% for weeks and many listings sitting longer, I’m hearing more questions about seller financing on Maui from both sides. It can work, but it’s a legal and tax decision as much as a pricing one. Here’s how it works as of October 2026.

General information, not tax or legal advice; confirm with a CPA or Hawaiʻi attorney.

What is seller financing?

Seller financing means the seller, rather than a bank, lends the buyer part or all of the purchase price, and the buyer makes payments to the seller. In Hawaiʻi, it’s usually structured one of two ways:

Structure	Who holds legal title during payments	Main document
Purchase money mortgage	Buyer (deed transfers at closing)	Promissory note and mortgage in the seller’s favor
Agreement of sale	Seller, until the agreement is satisfied	Recorded agreement of sale, then a deed at payoff

How does a Hawaiʻi agreement of sale work?

Under an agreement of sale, the seller keeps legal title until the buyer finishes paying, and then conveys title. Hawaiʻi law (HRS §502-85) defines an agreement of sale as an executory contract of this kind and gives a buyer whose agreement is properly recorded priority over certain later claims against the seller, such as a later conveyance or an unrecorded judgment. That’s one reason recording the agreement matters for the buyer.

When the buyer satisfies the agreement, the seller’s deed to the buyer is recorded and those competing claims are cleared as to the property, under the same statute.

Do conveyance tax and other closing costs still apply?

Yes. Hawaiʻi’s Department of Taxation lists agreements of sale among the documents subject to conveyance tax, and its instructions say the tax applies whether or not the document is recorded. When conveyance tax was paid at the time the agreement of sale was recorded, the later deed fulfilling it can qualify for an exemption. My post on selling a Maui home: conveyance tax, HARPTA and FIRPTA covers the rates and withholding rules that can also apply.

Escrow, title and recording still matter, too. A seller-financed sale should close through escrow like any other.

What federal rules apply to a seller who finances?

The Consumer Financial Protection Bureau’s Regulation Z treats some seller financers as loan originators unless they fit specific exclusions (12 CFR 1026.36):

• One-property exclusion: A natural person, estate or trust that finances the sale of only one property it owns in any 12-month period. The financing can’t result in negative amortization and must have a fixed rate, or an adjustable rate that adjusts after five or more years with reasonable limits.
• Three-property exclusion: A person financing three or fewer properties it owns in any 12-month period. The financing must be fully amortizing, the seller must determine in good faith that the buyer has a reasonable ability to repay, and the same rate rules apply.

In both cases, the seller can’t have built the home in the ordinary course of business. Because of these conditions, I suggest sellers have a Hawaiʻi attorney draft the note and agreement and confirm which exclusion, if any, applies.

How is seller financing taxed for the seller?

The IRS generally treats it as an installment sale when at least one payment arrives after the tax year of the sale. Sellers report it on Form 6252, interest received is ordinary income, and the note needs adequate stated interest or part of the principal can be recharacterized as interest. Depreciation recapture on a rental is reported in the year of sale. For the capital gains side, see my post on capital gains tax on a Maui home sale.

Can a seller offer financing if they still have a mortgage?

Often not without the lender’s involvement. Most mortgages include a due-on-sale clause, so a seller who still owes money should talk with their lender and attorney before offering terms. Assuming the seller’s existing FHA or VA loan is a different option; I explain it in my post on assumable mortgages on Maui.

My Take: What I’m Telling Buyers and Sellers

For sellers, the first step comes before any talk about price. You need to talk with your accountant, and work out whether HARPTA or FIRPTA applies to you. Let me know whether a 1031 exchange is something you’re considering, because carrying a note changes that picture. Most important, plan this well with your tax advisor so you’re in the best position tax-wise.

For buyers, seller financing can make a purchase possible when a bank loan is hard to get, but read the terms as closely as you would any loan: the rate, whether there’s a balloon payment, what happens if you miss a payment and how title transfers at the end. Have a Hawaiʻi attorney review the agreement, record it, and get title insurance. A lower rate than the bank’s isn’t a good deal if the balloon arrives before you can refinance.

Frequently Asked Questions

Is seller financing legal on Maui?

Yes. Hawaiʻi recognizes agreements of sale and purchase money mortgages, and federal lending rules set conditions for sellers who finance.

What is an agreement of sale in Hawaiʻi?

A contract where the seller keeps legal title until the buyer pays in full, then conveys title. HRS §502-85 covers priority for recorded agreements.

Do you pay conveyance tax on an agreement of sale?

Yes. The Department of Taxation lists agreements of sale as subject to conveyance tax.

How many seller-financed sales can a homeowner do without being a loan originator?

Under Regulation Z, a natural person, estate or trust can finance one property it owns in a 12-month period if the loan meets the rule’s conditions.

What are mortgage rates on Maui right now?

Freddie Mac’s national 30-year fixed average was 7.32% for the week of October 22, 2026; your quote depends on your loan and credit.

Ask Benjamin

If you’re considering offering or accepting seller financing, I’m Benjamin Finnerty, and I’m happy to walk through how it could fit your sale or purchase alongside your attorney and CPA. Call or text 808-481-9748 or email benjamin@the808team.com.

Sources: Hawaiʻi Revised Statutes §502-85; Hawaiʻi Department of Taxation, Form P-64B instructions; Consumer Financial Protection Bureau, Regulation Z, 12 CFR 1026.36; IRS Topic No. 705, Installment Sales; Freddie Mac Primary Mortgage Market Survey (Oct. 22, 2026).