This probably isn't the place to post this, but I am wondering about different options, re: seller carryback financing. Any ideas?

ok, thanks for sharing.

I'm not sure if I understand the question but it seems that you're wondering how a Seller Carryback works? To give you a rough idea, we'll use a simple example of a property at $100,000 FMV. For whatever reason, the Buyer may only qualify for 80% maximum financing. The Buyer still needs to come up with the other 20% to close on the deal. In a Buyer's market, like what we're seeing now, Seller's are more than willing to carry the other 20%, on an agreeable term of both parties. The Seller will actually carry the Note and act as the lender or bank in the 2nd lien/position.

Hope that Helps,

thanks for responding. i was wondering how to write it up - is there a special, generic type of form? what if they want to put 10% down and have the seller carry a note with a baloon payment for a period of time? can you just write up whatever you want or are there regulations and specific forms that have to be used?

Yes, the Buyer and the Seller can come to any sort of agreement. There are some creative variances of Seller Carrybacks but they all achieve the same goal. You can find the forms by doing a Google search... I'm sure there are some free websites out there. The forms that are often used are a "Land Contract" or "Contract of Sale" or an "Installment Sales Contract". The Seller normally keeps legal Title to the property until the financing terms have been completely fulfilled. I would suggest consulting with a Real Estate Attorney in your local area for legal insight on a Seller Carry.

Thanks for the details.

send me an email. i can help you out

alvin.m.reyes@gmail.com

I've done several of these transactions in the past. Promise Land explained it pretty well. You'll also need to get a Mortgage Note filled out and signed by both parties. Most likely it'll have to be notarized as well. The note will contain the terms for the loan the seller is giving to the buyer. The lender for the first mortgage will want to see a copy of that. The title company will also record this to make sure everything is legal.
Once the buyer has paid the seller off or come to an agreement that no more payments are due, the seller gives the buyers a leter of satisfaction showing that the mortgage due has now been paid.

Good Luck,

Thank you, Rude.

It is important to understand that the lender for the first must allow the carry back and the CLTV that it creates. When buyers come into a transaction with less of their own funds it creates additional risk for the first lender.

A listing agent may also have a duty to make sure that the sellers understand the risk factors involved with the seller carried second.

when utilizing seller financing, be careful of the due on sale clause, tax reassessments, and title being compromised when receiving down payments or applying rent credits applied to a purchase price.

how would you protect the seller's title, property and all parties involved in these types of creative financing?

when a seller gives monthly rent credits or receives a down payment thats being applied to the purchase price, this automatically gives the tenant equitable interest in the seller's property. so when the tenant defaults on the payment, you can't simply evict them but rather foreclose and go through a quiet title action to get the property back. sure most tenants aren't that smart to realize this but all they need to do is hire a lawyer that can easily recognize a bogus lease option that isnt structured properly.

let me know if you want to know a better, legal, safer, ethical way of doing seller carry backs.

With due respect Alvin, what you're describing is not a seller carry back but more of a lease option or rent with option to purchase situation.

In a true seller carryback, the new buyer actually purchases the property and takes title to it. The seller comes off title but carries some of the financing and secures it with a TD or mortgage usually recorded behind the buyers new mortgage. If the new buyer defaults on the seller's note then the seller can of course foreclose, keeping in mind that they are in second position so it may be more difficult to get their money back.

no problem. i was just stating it in general. most of the public will recognize rent to own or lease option versus a wrap, all inclusive trust deed, contract for deed, land contract, installment land contract, equity share, etc. theyre all seller financing where the seller has to carry all or part of the note?

but yes, since you went into details, i agree with you

i was just pointing on the cons and pitfalls of a seller carry back or general seller financing.