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Common
reason why a seller would not offer a deed of trust in a seller
carryback
•They
owe a mortgage on the home
•The current lender has a due on sale clause
preventing title from being released to the new buyer without
the current lender being paid off
•The owner is skeptical of the buyer defaulting
and needs an option to foreclose quickly
Other
Types of Seller Carrybacks
Land
Contract | Agreement for Sale
A
Land Contract also known as an Agreement for Sale is when
the seller gives the buyer/borrower “equitable title”,
while the seller retains legal interest in the property until
the debt is satisfied. In case of default a land contract
usually contains a clause protecting the seller and allowing
the seller to forfeit the contract and evict the buyer. The
difference between a land contract eviction and a trust deed
eviction are the time frames involved. Time frame for trust
deed foreclosure is about four months. Time frame a land contract
foreclosure/eviction depends on the how much the buyer placed
as a down payment. The following shows the eviction time for
a land contract:
•
0-19
Percent Equity 30 days to catch up payments
• 20-29
Percent Equity 60 days
• 30-49
Percent Equity 120 days
• 50
percent or more 9 months
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It
is important to mention, a Land Contract does not give the buyer
a warranty deed only equitable title. Because of this, the buyer
does not yet own the property. When a buyer has equitable interest/equitable
title, they have the right to obtain the deed in court. With a
warranty deed the buyer has Fee simple interest which gives them
a warranty deed and means you have a deed reciting full ownership
of the appurtenant rights in the property. More importantly with
a land contract you cannot sell the property yet, because you
do not hold any type of title.
Not the best option for the buyer, because the seller can foreclose
on the buyer much faster for nonpayment. The buyer also does not
hold title to the home, which can present to be a problem for
tax purposes and tax credits. And since they do not hold title
to the home on an agreement for sale, they cannot sell the property
through the MLS or refinance the home. This is the worst type
of seller carry.
Lease Options vs Seller Carrybacks
A
lease option is dangerous because the money put down can easily
be lost if the seller defaults on the mortgage payments. A seller
carryback will allow the buyer to make payments directly to the
lender which will always put the buyer at a better advantage.
Many former owners now renters are looking for lease options.
While a lease option has it’s benefits, a seller carryback
would be an ideal type of future ownership. Most owners offering
a lease option are giving the lease option based on future value
not present value. Lease options also require a down payment for
the option itself. This amount is non-refundable if the option
is not exercised within the time frame stated in the contract.
After
you’ve found a seller carryback
Once
you find a home you’re interested in, please email us the
MLS number to verify the property is correctly listed a seller
may carry and find the details of the amount required down and
financing offered. Most seller carrybacks will carry financing
for at least 1 year, and rates usually range but the going rates
range from 7-8.5% depending on the loan amount.
A1:
A true seller carry back allows for legal title to be conveyed
to a third part or trustee who holds as security for the beneficiary
(seller). In case of foreclosure, standard trust deed foreclosure
procedures are used. In other words, the buyer receives a Deed
of Trust which gives the borrower/buyer all ownership rights while
the lender has an equitable interest in the property. A true seller
carry back allows for fee simple ownership, which gives the buyer/borrower
the right to sell, convey just as a borrower would have using
a traditional lender.
Lease
Options vs Seller Carrybacks
A
lease option is dangerous because the money put down can easily
be lost if the seller defaults on the mortgage payments. A seller
carryback will allow the buyer to make payments directly to the
lender which will always put the buyer at a better advantage.
Many former owners now renters are looking for lease options.
While a lease option has it’s benefits, a seller carryback
would be an ideal type of future ownership. Most owners offering
a lease option are giving the lease option based on future value
not present value. Lease options also require a down payment for
the option itself. This amount is nonrefundable if the option
is not exercised within the time frame stated in the contract.
Broker Executives, Inc.
www.SellerCarryHomes.com 2009© All
Rights Reserved
16635 N Cave Creek Rd #207, Phoenix, AZ 85032 Office: 480.297.2008
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