Larry Gotcher: Seller Financing Emerges as Primary Structure in Commercial Real Estate Transactions

Written by:

Heather Hook

Date:

09 Feb 2026

KeyCrew Studio

Share

Share via Facebook

Share via Linkedin

Share via X

Copy to clipboard

Larry Gotcher discusses how industry shift reflects tightening bank lending standards and evolving investor strategies in 2026 market

A significant structural shift is reshaping commercial real estate transactions. Seller financing, once considered an alternative tool, has become the predominant deal structure, appearing in approximately 95% of commercial offers regardless of transaction size.

Larry Gotcher, owner of Resource Realty Group in Ann Arbor, Michigan, reports this trend across his firm’s $100-150 million in annual transactions, from $500,000 deals to $100 million acquisitions. “It’s become what sophisticated investors are doing across the board,” Gotcher explains.

Understanding the Lending Landscape Shift

The prevalence of seller financing reflects fundamental changes in bank lending practices. Loan-to-value ratios that commonly reached 65-70% have contracted to 40-50% in many markets, driven by regulatory scrutiny, litigation-driven underwriting complexity, and lender caution around market volatility.

To bridge the financing gap, deal structures increasingly incorporate seller notes, typically five-year terms allowing buyers to refinance once appreciation builds sufficient equity. “Banks will do a 40 or 50% loan instead of 65 or 70% loan to value, then ask the seller to finance a portion,” Gotcher notes.

Strategic Implications

Gotcher observes this evolution creates opportunities rather than representing distress. “Buyers will often pay slightly above market value when sellers provide creative financing. They’re preserving liquidity and using seller equity to optimize their position with the bank.”

For sellers, participating in financing can accelerate transactions and command premium pricing. For buyers, the structure enables leverage while maintaining capital reserves for improvements or portfolio diversification.

Rethinking Traditional Investment Metrics

The financing shift has prompted reconsideration of evaluation methods. Gotcher’s firm removed cap rate figures from initial marketing materials to encourage deeper analysis of value creation potential.

“Investors sometimes dismiss opportunities based solely on stated cap rates without investigating underlying value drivers,” Gotcher explains. He cites an example where $25,000 in renovations across ten apartment units increased annual cash flow by $48,000, effectively doubling the cap rate from 6.5% to 13%.

Gotcher adds: “Different investors calculate cap rates differently based on their priorities. Understanding the specific market, property potential, and your investment criteria often matters more than comparing stated cap rates.”

Current Market Dynamics

Resource Realty Group‘s activity reflects broader trends favoring income-producing residential real estate, particularly apartment complexes. Tenant preferences have evolved toward larger units, two or three-bedroom configurations for home offices and storage, even for single occupants.

Market-specific factors also influence strategies. In Ann Arbor, where values remained stable during the 2008 recession, investors often accept initial negative cash flow for long-term appreciation. “Breaking even before taxes in the first two years represents strong performance,” Gotcher observes.

Operational Efficiency

The firm’s model, closing $100-150 million annually with ten people, emphasizes process efficiency over agent volume. “We focus on upfront research, efficient marketing, and streamlined negotiations,” Gotcher explains. “Process discipline often means we’re substantially ahead in transaction timelines.”

Industry Outlook

The prevalence of seller financing represents market adaptation to current lending conditions rather than a temporary workaround. As this structure becomes normalized, flexibility in deal structuring and willingness to look beyond traditional metrics may increasingly differentiate successful transactions from missed opportunities.

Larry Gotcher is owner and broker of Resource Realty Group in Ann Arbor, Michigan. With over 30 years in real estate and 20+ years in mortgage banking, he specializes in income-producing properties and is developing a REIT for national and global investors. Learn more at resourcerealtygroupmi.com.

KeyCrew provides news and industry insights. This article is for informational purposes and does not constitute real estate, financial, or investment advice.