Seller Financing or Seller Carryback Financing
Let’s face it, selling your home can be pretty difficult, and even if you do find a buyer, who knows if they can obtain financing. In a Buyer’s Market sellers often entice buyers with special concessions such as Seller Paid Closing Costs and Seller Carryback financing.
The Seller Acts as the Bank for the Buyer
Seller Carryback financing is when there is no Institutional Bank or Lender involved in the purchase transaction at all.
The Owner of the property; whom is the Seller of the Property, acts as the Mortgage Lender and finances the purchase or Carries the whole 1st Mortgage Loan.
Seller “Carryback” Financing
In certain transactions, if there is some Institutional Bank or Mortgage Lender financing, but this financing is insufficient to cover the full purchase price of the property, because the buyer cannot qualify for a mortgage loan sufficient to cover the full purchase price. In this case, the Seller of the Property, acts as the Institutional Bank or Mortgage Lender and finances a 2nd Mortgage Loan for the buyer, “Carrying” this behind the Institutional Banks or Mortgage Lenders 1st Mortgage Loan.
This being the case, it is said that, the Seller has “Carried Back” a 2nd Mortgage Loan , behind the Institutional Banks or Mortgage Lenders 1st mortgage loan. This 2nd mortgage on the sold property, the buyer pays down each month in small payments, until it is paid off.
“Not only is this offered as a means to getting the property sold, but often it is necessary to get the transaction closed, because the Institutional Banks or Mortgage Lenders offering conventional financing won’t offer the total amount of financing needed; and this possibly because of the buyer’s limited credit score, limited income, or maybe the buyers is limited with regard to the amount of down payment they have.”
By offering Seller Carryback financing more real buyers will be able to qualify to purchase your property. It also makes your property more attractive to a larger group of buyers, and as well can increase the sales price of your property. In addition to that, you’ll be earning interest each month as opposed to a straight cash sale. The concept behind this is that if you believe in the value of your property and based on the buyer qualification, you think and feel the buyer will make the mortgage payments without fail, it can be a good investment and a means to facilitate the sale of your property. In times of increasing interest rates and decreasing property values, it could make or break the sale of your property, as buyers shop around for the best terms; especially when Institutional Banks or Mortgage Lenders won’t offer 100% financing.