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.

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A2: 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

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.

More and more buyers are calling our office and requesting seller carryback properties. Almost all the buyers calling have had a recent foreclosure. What’s nice about this type of financing is it’s up to the owner whether they qualify or not. This makes qualifying discretionary instead of black and white underwriting guidelines. As a rule of thumb, a buyer typically needs 10% down to qualify for a seller carry. It can be done with less, but the costs associated with selling the property can easily amount to 10%. A buyer should also understand the different types of seller financing being offered. There are Land contracts/agreements for sale and first deeds of trust. Knowing the difference will determine if a seller carryback should be considered on a property.

Cost to buy a home with bad credit

The costs entailed is usually a higher interest rate rather than fee’s or closing cost. Since 2006, nonconforming loans have gone away which was the primary source for buyers to obtain financing to buy a home. With nonconforming loans no longer available, buyers are looking into seller carryback homes. The major costs associated with seller carrybacks is the interest rate and the down payment. Interest rates on Seller carrybacks range from 7-12% depending on the seller/investor selling the home. Closing costs is no more than 1k for title costs but the down payment usually averages 10%.

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