The Carry Back

Dear Forum:

What Does It mean to carry back a note.
Please give a scenario where this would take place.
Thank you.

Barbara :-D

Comments(1)

  • davehays7th April, 2004

    Barbara,

    When you carry back a note it is the same thing as seller financing, or owner financing - all pointing to the same thing, which is the owner/seller of the property becomes the bank and finances the sale to the buyer. You've either got bank financing or owner financing.

    People carry back notes for many reasons.
    1. They are in a buyer's market, and use it to attract very many more buyers, pick the best one, get some down payment, and collect cash flow (they obviously need to have a certain amount of equity to do this, because liens have to be paid off at closing)
    2. If they are motivated to sell, but not motivated enough to sell at steep discounts most real estate investors need to do profitable flips, they use temporary seller financing. What that means is they find a motivated buyer, a nonconforming one for example, and work with a note broker who works directly with note buying investors who buy and hold owner financed mortgages as a cash flow investment. They do this via simultaneous closing, where there are two closing events: a) The owner takes back the note and b) the owner sells that newly created note at closing to the note investor at a discount, which varies, but could be as high as 93% or so of the appraised value of the home.

    Hope this helps, Dave

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