Seller Carry Back Financing for Newbies

Selling a home can be difficult, especially in a buyer’s market. At other times, you may have plenty of interest, but few buyers who can obtain the financing to purchase your home. When it becomes difficult to sell a home, sellers often find that they must make concessions in order to sell their home. If paying closing costs or putting on a new roof doesn’t appeal to you, then seller carry back financing may be an option that makes more sense.

What is Seller Carry Back Financing?

If this term is new to you, take a few minutes to become familiar with seller carry back financing. This arrangement basically means that the seller acts as the lender and the buyer makes monthly payments directly to the seller who gives up a lump sum total in exchange for monthly payments. The seller benefits because the home can be sold and the seller often enjoys receiving the interest that would otherwise have gone to a bank. The buyer benefits because they are able to obtain financing even when banks have denied them. For the situation to be truly beneficial to both parties, the seller should research the buyer’s credit history and the buyer should pay attention to the amount of interest that the seller hopes to establish.

What Are the Benefits for a Seller?

As a seller, if you are secure in the value of your home and you believe that the buyer will be consistent in making mortgage payments to you, then you may find that seller carry back financing is an advantageous investment. You’ll probably find that offering this financing alternative makes your home a little more enticing to a larger number of buyers. You may even find that you can sell your home for a higher price than you would otherwise. Naturally, the amount of money you may in the long run will be higher because you’ll be receiving interest from the buyer.

How Is the Interest Rate Established?

One of the most important factors of setting up seller carry back financing is the establishment of the interest rate. Both the buyer and the seller take part in this negotiation. The amount of the down payment and the credit standing of the buyer will be taken into account. For example, a buyer with a troubled credit history can usually expect to pay a higher interest rate, even when they have a large down payment. On the other hand, a borrower with a stable credit history and a sizeable down payment should be able to expect a lower interest rate.