We understand how frustrating it can be to search for a home in Austin. Half the battle is learning the key terms and what they mean in regards to Texas real estate. So each week we bring you Key Term Tuesday – our way of helping you decode the industry jargon that keeps you from owning your home search.
What is Seller Carryback Financing?
Seller Carryback Financing (aka Seller Financing) describes a situation where the seller both sells and finances the home’s purchase. Instead of accepting cash for all or part of the purchase price, the seller accepts a promissory note. For example, a home is sold for $100,000. The seller accepts a $10,000 cash down payment, receives $50,0000 from the cash proceeds of the buyer’s bank loan and carries back a $40,000 promissory note for the balance.
Seller Carrybacks are used in situations where bank financing is very expensive (ex. high interest rates) or the property does not meet the lender’s underwriting standards. In times when interest rates are affordable, carrybacks are not as common as sellers generally prefer cash proceeds rather than a promise to pay later.
Seller Carrybacks, when possible to employ, can be a creative way to get your home sold.
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