Question 1

What is seller carryback financing in Florida?

Accepted Answer

Seller carryback (also called seller financing or purchase money mortgage): the seller acts as the lender, financing part or all of the purchase price. The buyer makes payments to the seller instead of a bank. The seller holds a mortgage on the property as security. Common situations: the buyer cannot qualify for a traditional mortgage, the seller wants to facilitate a quick sale, the property is unique or hard to finance, and investment properties where traditional lending is restrictive.

Question 2

How is seller carryback structured in Florida?

Accepted Answer

Structure: the buyer and seller negotiate: the loan amount (the portion of the purchase price financed by the seller), interest rate (must comply with Florida usury laws; Section 687.02: maximum 18% for loans under $500,000), term (the repayment period; often 5-10 years with a balloon payment), amortization schedule (monthly payments may be based on a 20-30 year amortization with a balloon due at the end of the term), and security (the seller records a mortgage on the property; if the buyer defaults, the seller can foreclose). The seller should: conduct a credit check, require a down payment, and obtain title insurance.

Question 3

What are the risks of seller carryback financing in Florida?

Accepted Answer

Risks for the seller: buyer default (the seller may need to foreclose, which is time-consuming and expensive in Florida), subordination (if the buyer obtains a senior mortgage, the seller’s mortgage becomes subordinate), property damage (if the buyer fails to maintain the property, the seller’s collateral is diminished), and due-on-sale (if the seller has an existing mortgage with a due-on-sale clause, selling with carryback may trigger the clause). Risks for the buyer: balloon payment (the buyer may not be able to refinance when the balloon is due), higher interest rate (seller financing often has higher rates than bank financing), and limited protections (fewer regulatory protections than bank mortgages).

Seller Carryback Financing

Seller Carryback Financing in Florida

When Used

Structure

Risks

Related Terms

Barnes Walker Real Estate

Ready to Get Started?