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3 Reasons to Avoid Carryback Loans

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TERMINOLOGY

Carryback loans are a unique financing tool used to purchase property. They are very commonly used in commercial real estate. Sometimes, though, carryback loans should be avoided. Here are three reasons why:

1. Ulterior Motives

If someone is offering you seller financing, there is usually a reason behind it. Most of the time, a seller that offers financing is selling a property that no one wants. If the property you are looking at is being offered as part of a carryback loan, you need to ask yourself why it would be offered this way. Take a good look at the property and make sure nothing is wrong. Be certain you want to live there before you decide to purchase.

2. Overpriced

Many times they have to offer seller financing because the property is overpriced. Just because the property is being offered as part of a seller financing package does not mean that you should take it. Buy property based on the value of the property itself, not the financing attached to it.

3. Default

If the seller still has their name on the loan, you have to rely on them to a certain extent. If you are making your payments to them each month and they don't pay the bank, you might lose your asset.