Seller Take-back

Not all real estate transactions involve a bank or a mortgage broker. Sometimes the seller becomes the lender to the buyer.

A seller take-back is any transaction in which the seller loans money to the buyer to close on a piece of residential real estate.

The amount of the down payment from the buyer and the mortgage to the seller isn’t negotiable between the buyer and seller.

Typically, the down payment to a seller is 10 to 35 percent of the purchase price to provide the seller with funds in case of default.

The mortgage amount can be for the remainder. Another option for the buyer is to get a conventional loan for a large portion of the purchase price and to finance any remainder through the seller.

Seller take-backs, also known as seller financing, are used in many situations. For example:

- When the seller’s property doesn’t conform to conventional loan guideline

- When the seller is at a tax disadvantage to collect the proceeds at one time

- When competition from similar properties is great

- When the borrower doesn't qualify fo rconventional loan servicing.

Dean Coe, a broker/owner of a Coldwell Banker franchise in Winthrop, Washington frequently represents sellers who wish to finance their own properties.

“We have a lot of resort and recreation property in this area,” explains Coe.

“As interest rates rise and funds are more difficult to find, sellers are more likely to go seller financing.”

Many of the properties around Winthrop, popular for year round sports from golf to skiing, are ideal for seller financing because they’re outside of traditional lender guidelines.

“Lenders don’t like to value properties in which the land is more than the improvements,” says Coe.

“That includes get away properties such as ranches and farms.”