Seller Carry Back: Finance a Home Without a Mortgage Most people have never even heard of a seller carry back, yet it was highly popular when people bought and sold homes 40 years ago. Right now, in our economy, it can really pay to understand this real estate strategy.
What is a Seller Carry Back? A seller carry back is simply owner-provided financing. It is also referred to as “Seller Financing”, or “Owner will Carry”. This strategy is a Seller offering to carry back a note—This can be a tremendous win/win for both the seller and buyer. Seller carry backs are becoming increasingly more popular in today’s economy as getting traditional home loans from banks becomes more challenging.
Here’s how it works: When a homeowner wants to sell his house but has trouble getting enough qualified buyers due to lending rules and regulations, the seller can consider to carry back the note on his own house.
The buyer and the seller sign a promissory note. This note says the buyer promises to pay a specific amount of money, with a specific interest rate, at a specific time. Sounds like a mortgage. The only difference is that instead of making payments to a bank, the buyer makes monthly payments to the seller on an Agreement for Sale.
The seller moves out, transfers title, and collects monthly payments from the buyer. The seller acts like the bank, holding the note and collecting payments. If at any time the buyer stops making monthly payments, the seller has the opportunity to legally foreclose and take the property back. They can then try to sell the property in a traditional sale, or carry back a note again. There are more terms and conditions that protect both the Buyer and Seller, but this is extremely common, and a great way to own a home in lieu of renting.
Don’t feel like you cannot be a homeowner, because you can!