Home > Article Center > Avoid Seller Carry Back Financing

Why to Avoid Seller Carry Back Financing When Buying a Home

In these trying economic times, there are few things more enticing to a prospective buyer than the possibility of seller carry-back financing. This type of financing allows the buyer to avoid the perceived hassle of site-built home financing, along with a degree of insurance against fraud, and often will feature a below-market interest rate and longer loan term.   However, it is important to realize that seller carry-back financing is a trap often used by sellers of manufactured and mobile homes.

The trap is set by seller who is having difficulty finding a buyer for his or her manufactured or mobile home. Reasons for this difficulty may be that the park´s space rent is too high, or perhaps the location is in blatantly obvious decline. Regardless of the cause, the seller has a choice: either sit on the home for an undeterminable amount of time, or find a "creative" way to snare a buyer. An easy-to-qualify, below market interest rate loan for an already affordable home is, in this case, usually too good to be true.

In actuality, there is nothing wrong with a below-market interest rate seller note. However, when used as a trap, it is highly unethical.

The manufactured home seller, having lived in the park for a long time, already knows that the mobile home park itself will never hold up to the scrutiny of a lending institution or the appraiser. In order to prevent the buyer from discovering that the manufactured or mobile home is overpriced, or located in a low-equity mobile home park, or suffers one of the traps that prevent financing from being available, the seller offers to carry the loan for the buyer and completely eclipses the traditional lending institution from the beginning of the transaction.

The second stage of the seller´s sneaky trap is to offer a shorter term on the manufactured home loan, typically ranging from two to five years. Within the term, the below-market interest rate is usually only valid for the first few years. The buyer is almost immediately put into a negative cash-flow scenario, which leads to the buyer flooding every lender with loan applications in a frightened frenzy. Most loan applications are declined, due to the perception of loan fraud. Faced with the impending due date for the remainder of the note and no traditional financing options, the buyer often is forced to default the home back to the seller, having forfeited his or her down payment to the seller (not to mention the mobile home mortgage payments which are now no more than rent payments).

Avoiding this trap is not difficult, especially for buyers with honest and experienced agents or brokers. When considering your manufactured or mobile home purchase, you should never consider a mortgage based on any financing outside a reputable mobile home mortgage broker or lender. Additionally, never purchase a manufactured or mobile home – do not even enter escrow – prior to obtaining a guaranteed approval from your lending institution or mortgage broker. Maintain a conservative and logical point of view and always contact either a lending institution or mortgage broker to obtain the most trusted and most trusted financing for manufactured or mobile homes.

(800) 882-1999

CAMHF - Mobile Home Loans
250 S. Pacific Street #104
San Marcos, CA 92078

Company Info.

Mobile Home Services