Carryback
Hello,
I have asked this question before but really didn't get any good reply back so here goes. Can anybody tell me what a carryback is? Does it count as the down payment or how does it work? Any help greatly appreciated, I have a big deal going down here (my real estate lady didn't know what one was). 
Hi, I hope this is somewhat helpful. Are you the buyer or seller? I purchased a home 10 years ago. the asking price was $116000. Sellers equity was $35000. I only had $10000 for down. Seller did a carryback for the difference. It does not count as a www.second.I made my housepayment to title co. they took out mortgage co. money sent it then sent seller his $200.00 a month. It did not count as dowm as far as a reduction price until I sold or paid it off. When I went to refinance the house three was not a mortgage co. that could find the carryback(wierd)They all thought that the equity I had in the house was much greater since all that showed was balance to mortgage www.co.I may have just rambled too much, sorry. Just thought I would tell all, but little of what i know. call title co. they are famiiar with these. I havent found many people who know what it is.
Hello,
I am the buyer and the deal is for 625000 and and I am short for the down payment. Was wondering if it would count as the downpayment. I have heard of of other stories. Pease advise. Thanks!
With a carry-back the seller is letting you borrow some of his/her equity so you won't need to come up with as much cash for down payment. If this is in your purchase agreement, your primary lender may not go along with this even though it does not affect the amount that the primary lender is lending.
I have had sellers do carry-backs but often these are delayed until some time after closing. The advantage in the carry-back is that you can get soft terms from a motivated seller. I get at least 5 years on small carry-backs and usually 10 on larger notes.
Normally, carry-backs are secured as second mortgages or trust deeds on the purchased property but they don't have to be. This is between you and the seller and is limited by imagination.
I hope that this helps.
Regards,
Ed
Do I understand "carry-back" to mean owner-financing?
Also, if this is true, then owner-financing can never exceed the owner's equity?
Or, can owner-financing exceed equity, and just add to the liens. Sounds crazy I know, to add to the liens or to owner-finance more than one's equity, but that is exactly what has been said to me by two more experienced CREIers on our site. I was told a seller in foreclosure could seller-finance and avoid ALL of their problems.
I've been wrestling with owner-finance for a month and a half. Bought three specific books and posted several messages. EIther my question is too elementary to be in the books (which I read thoroughl), or there is more to the story.
Alan
- Give love; its a freedom not to be contained.
fearnsa,
You might give us the context of what you were told, but I will add a little more of my two cents worth.
Normally, a seller carry-back is limited by the amount of seller equity, particularly if the seller's primary loans are being paid off when the purchase occurs.
Suppose you find a house and agree to pay $100k which is fair market value with the following situation.
$100K FMV
$60 K Loans
============
$40 K Seller Equity
On a typical conventional purchase you find a lender to lend 80% ($80K) , you plunk down $20K and the house is yours. From the $100K ($80K from lender, $20K from you), $60K pays off the seller's lender and $40K goes to seller.
Second Scenario:
You have no cash but seller wants out and agrees to give you a loan (carry-back). Your lender gives you $80K, seller creates a note for $20K, you get the house for no money down. Seller's lender gets paid off ($60K) and the remaining $20K goes to the seller. You owe the seller the remaining $20K of his equity which is documented by the carryback.
Third Scenario:
Seller really wants out. Of the $80K your lender gives you, $60K pays off seller's note and the remaining $20K goes in your pocket. Seller carries back a note for $40 K. You now have a house that is worth $100K but is securing loans for $120K. The good news (maybe) is that you have a no money down house and $20K in your pocket. The owner has created a note for the full amount of his equity.
Fourth Scenario:
Seller REALLY wants out but has some spare cash. You tell seller you need $40K to buy a new car (great choice for an investment). No problem.
Seller gives you $20K cash plus his house. You get another $20K from the $80K your lender provides. As before, seller's lender gets paid off ($60K). Seller creates a note for $60K (his equity in the house plus the $20K cash he gave you.
In this last scenario the carry-back exceeded seller's equity.
With foreclosures, the situation is a bit different. Most likely, the seller is cut off from a source of funds. His market is different than yours. The value of his house may be very low (while he is still owner). If you come in with an offer and get new financing the seller may be very willing to carry back a note since the note is of more value to him than his house the day after foreclosure.
I hope this helps.
Regards,
Ed
Thanks for the replies. One person put it to me this way but they could be wrong.
[ Edited by studlee on Date 05/20/2004 ]
600,000 purchase price
150,000 Carryback
Does carryback only reduce the amount I have to put down?Do I need a need a down payment and if so on what amount? I thought I could use the carryback as a downpayment. I am getting close to writing the agreement, any replies would be helpful. Thanks.