In last week’s Blog on April 10, 2013, I gave you some reasons why you should not offer a seller carryback. This week I want to give you some reasons why you should!
Let’s say you have lined up a buyer for your property. He moved to your city in the past 12 months. He has a new employer but has been in the same industry for 10 years. He moved because of the advancement opportunity – more money and more responsibility. Plus, his wife’s family lives in the neighboring town. He and his wife have 2 small children. You like this family and their circumstance.
They can’t get a bank loan because of his “new” employment – the bank wants him in town for at least 2 years. Their credit is 700+ and there are no remarkable negative events in their credit history. His salary is solid and will increase substantially if the opportunity pans out the way he envisions it. They can’t give you a 20% downpayment but they do have 15%. You work out the numbers and at 8% they can afford the monthly payments over a 20 year term. The possibility exists that they could be in a position to refinance in a few years and pay you off.
This is a good situation for a local seller who does not need to cash out. The career opportunity and family nearby are strong motivating factors for both the buyer and seller. If this man had been with his employer for at least 2 years, odds are the bank would have granted him the loan on very favorable terms. He would have been a good prospect. So, he’s a good prospect for the seller willing to offer a seller carryback.
Depending on the seller’s comfort level, he can use a 3rd party servicing company to handle the payments, do the accounting for the property taxes and insurance, and if the worst happened, assist in the foreclosure process. Or, the seller could set up an automatic monthly deposit into his account and receive the payments that way.
Some sellers are out of their comfort zone offering a seller carryback and then dealing with the administrative issues that accompany it. Others are just the opposite.
Know thyself and act accordingly.