Selling your home can be a difficult proposition, to say the least. It can be difficult to find a buyer, and it can be even more difficult when you have found a buyer but for whatever reason, they cannot obtain traditional financing to purchase your property. Enter the “Owner Will Carry” or “Seller Carry-Back” type of financing. Simply put, if you are willing to finance some buyers yourself, you might be more likely to sell your property quicker. Here are some of the basics of the “Seller Carry-Back” situation.
Carryback Financing Defined
The best definition of this option is that you as the seller will act as the bank/lender for the buyer. This works well if the buyer needs some help with the financing. In some cases, this might also be extra financing where the seller is carrying a second mortgage, particularly in the case of an expensive property.
Seller Carryback Program: Making Your Property More Marketable
Offering to carry the note can make your property have more potential buyers. First of all, it will be excellent for those potential buyers who don’t possess a down payment that is high enough for potential banks. Second, this option can be a great way for you to earn interest YOURSELF on your property rather than when the buyer uses a traditional bank purchase.
Seller Carryback Program: Don’t Be a Pushover
It is important to remember that this is a business proposition. In many cases, you need to be aware that the interest rates that you will charge will often be significantly higher than the interest rate they would get at a regular bank. Moreover, you can expect to charge your buyer an interest rate between 8% to 15%. Of course, part of the reason why you should charge higher interest for this privilege is that it is assumed that your buyer is attempting to avoid going through a bank and potentially being turned down.
Seller Carry Program: Be Careful About a Foreclosure
Last but definitely not least, you should be careful about the potential for foreclosure. In this event, you will be the last party to get paid. If you are putting up a second mortgage for your buyer, there is the potential that you could incur a heavy loss.
As always, knowing the basics is just the beginning. You should always do extensive research to determine if owner financing is the right option for you to go if you are considering selling some of your property.