My name is Daniel Reynolds, Designated Broker, for Broker Executives, Inc.. I have helped hundred's of buyers and other Realtors understand the differences between deeds of trust and agreements for sale. Or as you know, seller carrybacks.I have also assisted several buyers own a home again. Homes ranging from 50k to 650k on a seller carryback note. If you are considering a seller carryback/ owner financing, please at the very least give me a chance to educate you so you're not taken advantage of by a seller or a listing agent. If you have any doubt in my ability, please review my feedback.

First Deeds of Trust is a form of a Seller Carryback

Properties offering Trust Deeds give the buyer all the legal rights someone would have if they obtained a loan from a bank. They can refinance, sell the property, take a 2nd mortgage and lease the property if they choose. What buyers need to be aware of is the difference between a first deed of trust and an agreement for sale. Both appear to be a seller carry but only the first deed of trust offers true ownership of a property.

The Trust Deed is important but the mortgage note is just as important. Even when you finally find an owner with a seller carry back offering a deed of trust, you need to review the mortgage note document to ensure there are no balloons or adjustable rates that could increase. The title company you service the trust deed with should examine the deed and the note for you and advise you anything that could be of importance. If you are interested in a seeking a seller carryback, please don’t hesitate to contact us.

How a seller carryback in AZ works

Most AZ seller carrybacks require a minimum down of 10%. This allows the seller to pay for closing costs, escrow costs and real estate costs accrued in selling the home. Once a buyer has found a seller carryback, it’s a matter of coming to an agreement of terms with the seller. In most cases, a seller financing home will have a couple options the seller can execute for the seller financing. Those options include a land contract also known as an agreement for sale or a deed of trust seller carry. There are two options the seller has when it comes to offering seller financing.

Land Contract | Agreement for Sale

Not the best option for the buyer, because the seller can foreclose on the buyer much faster for nonpayment. The buyer also does not hold title to the home, which can present to be a problem for tax purposes and tax credits. And since they do not hold title to the home on an agreement for sale, they cannot sell the property through the MLS or refinance the home. This is the worst type of seller carry.

First Deed of Trust | Deed of Trust

This is the strongest type of ownership for a seller carryback. This type of seller carryback is equivalent to a buyer obtain a loan from a bank and purchasing the home. The term Deed of Trust is the type of title the buyer is receiving and is a common term used on any sale when title is being transferred.

Common reason why a seller would not offer a deed of trust in a seller carryback

-They owe a mortgage on the home
-The current lender has a due on sale clause preventing title from being released to the new buyer without the current lender being paid off
-The owner is skeptical of the buyer defaulting and needs an option to foreclose quickly

Common Knowledge regarding Owner Carry Listings

Lease Options vs Seller Carrybacks

A lease option is dangerous because the money put down can easily be lost if the seller defaults on the mortgage payments. A seller carryback will allow the buyer to make payments directly to the lender which will always put the buyer at a better advantage.

Many former owners now renters are looking for lease options. While a lease option has it’s benefits, a seller carryback would be an ideal type of future ownership. Most owners offering a lease option are giving the lease option based on future value not present value. Lease options also require a down payment for the option itself. This amount is nonrefundable if the option is not exercised within the time frame stated in the contract.

Recent Foreclosures and Seller Carrybacks

This may not be issue for some, but for others who have had a recent foreclosure, a 3 year seasoning is required before financing can be obtained. Bankruptcies are the same way, and need a 3 year seasoning before a buyer can purchase. This delay can be avoided if you find a seller carryback.

The types of seller Carrybacks

There are various types of seller carrybacks, please refer to our video regarding the different types. A seller carryback usually requires the same amount of money down and will allow you to lock in at today’s price. There are also tax benefits with a seller carryback as opposed to a lease option. To search Seller Carrybacks in AZ, please click the following link.

After you’ve found a seller carryback

Once you find a home you’re interested in, please email us the MLS number to verify the property is correctly listed a seller may carry and find the details of the amount required down and financing offered. Most seller carrybacks will carry financing for at least 1 year, and rates usually range but the going rates range from 7-8.5% depending on the loan amount.

A1: A true seller carry back allows for legal title to be conveyed to a third part or trustee who holds as security for the beneficiary (seller). In case of foreclosure, standard trust deed foreclosure procedures are used. In other words, the buyer receives a Deed of Trust which gives the borrower/buyer all ownership rights while the lender has an equitable interest in the property. A true seller carry back allows for fee simple ownership, which gives the buyer/borrower the right to sell, convey just as a borrower would have using a traditional lender.

Search AZ Seller Carrybacks | Owner Financed Homes AZ

A2: A Land Contract also known as an Agreement for Sale is when the seller gives the buyer/borrower “equitable title”, while the seller retains legal interest in the property until the debt is satisfied. In case of default a land contract usually contains a clause protecting the seller and allowing the seller to forfeit the contract and evict the buyer. The difference between a land contract eviction and a trust deed eviction are the time frames involved. Time frame for trust deed foreclosure is about four months. Time frame a land contract foreclosure/eviction depends on the how much the buyer placed as a down payment. The following shows the eviction time for a land contract:

• 0-19 Percent Equity 30 days to catch up payments
• 20-29 Percent Equity 60 days
• 30-49 Percent Equity 120 days
• 50 percent or more 9 months

The equity position a buyer has which ultimately is the amount they put down on the purchase will change the time period an owner can foreclose. We'll start off with how fast an owner can foreclose based on a buyer putting 10% down.

30 days-The first day a buyer becomes late on the payment, they have 30 days to bring the payment current.
20 days-After they have not made payment in 30 days, they have 20 days called Specific Performance to bring it current.
10 days-After the 20 days, they have 10 additional days to bring it current or the forfeiture period takes effect.

It is important to mention, a Land Contract does not give the buyer a warranty deed only equitable title. Because of this, the buyer does not yet own the property. When a buyer has equitable interest/equitable title, they have the right to obtain the deed in court. With a warranty deed the buyer has Fee simple interest which gives them a warranty deed and means you have a deed reciting full ownership of the appurtenant rights in the property. More importantly with a land contract you cannot sell the property yet, because you do not hold any type of title.

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