What exactly is 'Seller carryback Financing?'

It is never why. It is about no money down, I do use that lose! Just stick to your program and get that deal done! Remember magic buttons, I believe we can help people that truly care about Themself!Happy hunting?

Randy
For i have eyes;But i cannot see

Huh, sorry I don't know what your talking about my good sir/mam.

Still looking for an answer through.

I know when a thread doesn't get looked at for some time it well get pushed to the back where people aren't usually gonna see. So all I'm doing is pushing my thread back to the front again, in attempt to try to breath new life into it again lol. I don't ask too much I just need to know what exactly 'Seller carryback Financing' is? I know it has to do with the seller carrying a mortgage or something, but I don't know exactly how this kind of strategy works or how it's even done for that matter. A well educated response would be nice. Thanks in advance.

This means that the seller of a property agrees to act as a lender of money to help the buyer purchase the property. The banks are not involved in the transaction. The buyer pays the seller X amount of money, per month, for the term of the loan. This creates a cash flow for the seller. Hope this helps.

charlie-d

I get it now, so the seller is the one who loans the money for the buyer, ah ok now we're getting some where. So does the seller have to get a bank loan for this to happen? And if so, how would that be any good to the seller when the money he gets from the buyer each month just goes to pay back the bank loan?

There are basically two ways this plays out that I am aware of...

Scenario #1: The seller owns the house free and clear. This is actually more common than you would think. No so much in new tract neighborhoods, but many people live in their homes for a long time or pay down their mortgage pretty quickly for whatever purpose. In the scheme of things, it is not common, but it isn't like an anomaly either. In this case the seller doesn't need a loan for the house, they own it - paid in full. They basically are the bank, they do the mortgage and create the monthly payment plan for X years.

Scenario #2: The seller owns the house and has a mortgage. The the mortgage only has $200,000 left to be paid, but the house will be sold for $300,000. The seller can carry $100,000 in payments from the buyer - with interest (or if they don't want to carry they would get a $100,000 check at closing). So the buyer needs to get a loan for $200,000 - which is much easier to get (the loan to home value percentage is important... getting a loan for 75% of the homes value is way easier than getting a loan for 100% of the homes value). So the buyer would pay his monthly payments to the bank for the mortgage he got for the $200,000, and pay monthly payments to the seller for the $100,000 he financed through him.

This can be a important way for a buyer to get financing when the bank turns them away. However, you need to understand for "seller carryback financing" to happen that the seller has to either own the home free and clear or have significant equity in the house. The seller is not a position to carry if they owe close to the price the home is being sold for.

Sure, a seller could carry the deal in theory by having the buyer pay his payments to the him, and the seller pays off the mortgage. The seller would benefit because he is putting positive money in his pocket after he pays the mortgage. But, as a buyer I don't see this being viable unless you know/trust the seller. As a buyer I would not be making payments to a private party hoping they were paying a mortgage that acts as the first debtor if it gets foreclosed. I mean, you could be a buyer and put down a down payment and make payments for 6 months only to find you are getting kicked out because the seller was pocketing the money and not paying it down.

Really seller/owner carryback usually becomes an option applies if they own the home (they have no mortgage) or they have a very large amount of equity in the home, and the buyer pays off their remaining mortgage (lien) with cash or a new mortgage for that amount and then makes payments directly to the seller for the difference.

I would expect given the shaky financial people would only be open to carrying on homes they own free and clear then to allow their equity to be usurped by a 3rd party if the buyer defaulted. Whereas if they defaulted when they are carrying all of it they can always foreclose on the house and live in it again or resell it, without the hassle of fighting other debtors for interest in it.

Why does there have to be equity in a property to use seller financing?

equity than they really can't afford to do seller financing. Think about it? There has to be that cushion (equity) there like dgadmin said for the seller to carry the balance. I hope that makes sense.

I understand asking questions when you don't understand, we all do it. We are all here to share and learn about REI. By far, this is the best forum around, I think DG's products are very helpful and full of information that teaches us all we need to know. I would like to encourage you to read the books if you have not. They are priceless and maybe reading them will clear up some of your questions.
Best wishes,
Denise