The Seller's Guide: What is a Carry Back Offer?

A carry back offer can be a unique way to put together an offer that can benefit both the buyer and the seller. This solution can benefit a buyer if they’re waiting for a lump sum of money to come through in the near future, but don’t want to lose out on the house, or they are having trouble financing with lender or bank. It benefits the seller as they get a deal written up in writing, and then they’re also collecting interest from the buyer.

So what is a carry back offer?

In short, this means that the seller acts as a bank or a mortgage lender by carrying a second mortgage (if they already have one) on the property that they’re selling. Similar terms are set, just like a loan (down payment, interest rates, determined time frame in which the loan must be repaid), but it can also vary significantly since there aren’t as many rules and regulations. Think of it almost as a hard money loan that the seller is loaning to the buyer in order to purchase their home. This can sometimes be the only route to get the deal done, as conventional banks and lenders won’t offer the total amount of financing required to purchase.

What are the options?

This is where buyers, sellers and realtors can really get creative. There isn’t one way to go about this, so having it as an option on the table, allows you to negotiate what would be the best route for you. The time-frames, the amount borrowed, the payment plan, all of this is up for discussion. For example, if a buyer just needs financing to get the funds to support their down payment to get the loan is just one of the many ways to go about this. Explore all the options to see if it would work for you.

What are the benefits?

If you’re a seller and you have the liquid reserves to loan out, this can be a great way to get your home sold, for a premium price, and also gain interest on the said loan. However, there are risks associated, just as with any financial opportunity. Depending on the situation, make sure you ask a lot of questions so that you’re aware of the worst case scenario. In most cases if issues do arise, this is where the buyer defaults on the loan and you have to foreclose on them, which is a complicated process.

All in all, the main point of this is it can be a great option, you’ll just need to discuss all details and determine the risks before moving forward. Still have questions on this? Let’s connect.