Not Your Daddy’s Home Selling Tips, #7 – Be The Bank

from ‘Not Your Daddy’s Home Selling Tips‘ on yourValleyProperty.com

Be the Bank.

Under very specific circumstances it may be in your best interest to consider acting as the mortgagee. This is commonly known as a carry-back.

My best advice if you’re considering this would be to talk with a financial consultant and an attorney before proceeding.

You and the buyer would determine the interest rate, usually higher than the market rate as it is assumed there will be more risk. You will need to verify credit history and income. If your carry-back is partial, to supplement a down payment, and there is a mortgage lender financing the bulk of the loan, be aware that in the event of a foreclosure the bank will be in 1st place and your return may be little or nothing.

Holding the mortgage does have its advantages. It allows for a larger pool of buyers as down payment, closing costs and fees could be much lower, credit requirements may not be as strict, and it’s possible that closing a transaction of this type would be much quicker. If you are the sole source of financing, be aware that if the buyer defaults you will likely become the homeowner again.