For most people, the prospect of selling their home can be positively daunting. For starters, there are usually plenty of things to do just to get it ready for the market. Besides the traditional clean-up, paint-up, fix-up chores that invariably wind up costing more than you planned, there are always the overriding concerns about how much the market will bear and how much you will eventually wind up selling it for.
Will you get your asking price, or will you have to drop your price to make the deal? After all, your home is a major investment, no doubt a rather large one, so when it comes to selling it you want to get your highest possible return. Yet, in spite of everyone’s desire to get top dollar for their property, most people are extremely unsure as to how to go about getting it.
Some savvy sellers have long known a little financial technique that has helped them to get top dollar for their property. In fact, on some rare occasions, they have even sold their properties for more than they were worth using this powerful financing tool. Although that might be the exception rather than the rule, you can certainly use this technique to get the most money possible when selling your property.
Seller carry-back, or take-back financing, has proven to be a surefire technique for closing deals. Even though most people do not think about it when it comes to selling a property, they really should consider using it. According to the Federal Reserve, there are currently over 100 billion dollars of seller carry-back (seller take-back) loans in existence. By any standard, that is a lot of money. But most importantly, it is also a very clear indication that more people are starting to use seller take-back financing techniques because it offers many financial benefits to both sellers and buyers.
Basically, seller take-back financing is a relatively simple concept. A seller-take back loan is created when a property is sold and the seller performs like a lender by assisting in financing part of the total transaction. This can be a big help to cash strapped buyers that are having a hard time coming up with a down payment, and want to avoid paying mortgage insurance, which is required when putting down less than 20 percent of the purchase price.
In effect, the seller is actually lending the buyer a certain amount of money toward the purchase price. The traditional mortgage lender takes first position, and the take back mortgage will act as a second mortgage. The seller take-back loan is secured with the property just as the first mortgage is. It is important to note that a traditional mortgage lender will usually not agree to take second place, and they must be made aware of the existence of any other financing.
In most seller take-back financing transactions, the buyer repays the seller with interest in accordance to mutually agreed terms over a period of time. The take back loan is recorded as a regular mortgage on the property. Usually, the terms call for the buyer to send the payments, consisting of principal and interest, on a monthly basis. This is advantageous because it creates a steady monthly cash flow for the note holder. And if the note holder decides to cash out, he or she can always sell the note for a lump sum cash payment. This should be spelled out to the buyer in the note.
Regardless of market conditions, seller take-back financing makes sound financial sense; it provides both buyer and seller with flexible financing options, makes the property easier to sell at a higher price and shortens the sales cycle. It also has the added advantage of being an excellent investment that generates a steady cash flow and high return. If you ever need immediate cash, you can always sell the note.
If you are planning to sell a property, then consider the many benefits of seller take-back financing, and make sure to discuss any legal and tax implications with your financial and legal adviser.