Seller carry-back financing is a term used that describes the owner of the property also financing the sale of the house (instead of going to the bank and asking for a loan).
This concept has been around a lot longer than you may think. Banks did not offer real estate financing like we see today until the late 1934 with the Federal Housing Administration (which only financed 20% of a house purchase to start with).
Over the last fifteen to twenty years, the United States has shared a housing market that went down in history. Not unlike the great depression of 1929, we watched a rise that excited everyone until the 2008 housing bust that claimed thousands of homeowners and investors alike. Now we are in or near, the top of another housing market spike that has encouraged an “oversold” level of new construction housing and new investing. As I write this Article, the market outside is still doing good. Most people are moving houses fast and getting pretty close to their asking price. Over the spring and summer, I did not interview more than two people that took longer than three weeks to get a house they were selling under contract. Selling a house is easy when the house is; newly built, updated with modern features or in the best areas of town. If your sellers’ market is like ours, this scenario covers about 15-20% of our town. SO, what about the rest of the town that lives in the older less updated part of town, or worse still, in the lower income areas that many banks won’t lend on?
Seller carry-back financing can be tracked back to ancient India. Sellers taking payments for the sale of a product that was worth more than most people had available at one time became a great way to sell high end items. Selling a house for “cash only” would no longer be possible (Or the seller would have to take a much, much lower price) if the buyer could not borrow funds for the purchase.
Unfortunately, the bulk of the 2008 housing bust rests on the shoulders of the banks and the ridiculous terms they sold to unsuspecting home buyers that did not do their homework (of course, no one accused the banks of having morals). The lenders that DID NOT foreclose during that time were seller carryback lenders (for the most part). Seller carry-back financing allows the borrower (house buyer) to borrow the equity of the seller’s house until they can pay off the price of the house. The great part is; if there becomes a problem, like what happened in 2008, the borrower can TALK to the living, breathing lender (seller) and adjust the terms to keep both parties happy.
Sellers can finance the sale of their own house with high interest, no interest and higher sales price (for people in high tax brackets), no payments for… whenever, one payment per year, multiple payments per month or how ever works for both parties.
