What is a seller carryback note?
The kinds of notes that are the easiest to find and work with are privately created when someone sells a property or business and “carries back,” “holds” or “takes back” some or all of the financing. All those terms mean the same thing. This type of note is known by several names in various parts of the U.S.: seller-financed note (or mortgage or trust deed), owner-financed note (or mortgage or trust deed), private note (or mortgage or trust deed), seller carryback note (or mortgage or trust deed) or purchase money mortgage (or note or trust deed).
When someone sells a property (it can be a house, apartment building, commercial property, land or even a business with no real estate) and “holds” some or all of the financing you can buy that note and either keep it or sell it to an investor.If your plan is to sell it, you can use the investor’s money to buy it and receive a commission.
Here’s an example: Someone owns a house free and clear — no mortgage. They sell their house for $200,000, receive a $40,000 down payment from the buyer and take back the $160,000 balance as a note, an IOU, from the buyer, where he promises to pay the $160,000 plus interest in installments. The note is secured by the house, so if the buyer defaults the seller can foreclose and get it back. In other words, the seller is the bank.
