Buyer Carry Back 2nd Position

[Robert Thibault]

Let me be sure I understand.  I have a property where the seller is willing to carry 75% for 10 years.  So, is there any reason I wouldn't want to go get a non-conventional rental loan for 80%.  Then offer the buyer to carry back the 10 or 20% on a carry back loan?  Who do I approach with this first?  Do I need to make sure the seller owns "free and clear"?

[Doug Smith]

My answer is from a lender's perspective. Lenders almost universally do not like seller carry backs. Study after study that I've seen in my 32 year career shows that default rates are overwhelmingly higher the less a borrower puts down on the property from their own pocket. The less skin in the game a borrower has, the higher the default rate. Trying to slide this fact past a lender isn't going to work. We're going to want to "source" down payment funds. meaning we're going to ask for the last 2-3 months work of your bank statements, see a settlement statement from where you sold another property to acquire the cash, or some other way of coming up with the down payment funds. I know it's not answering your direct question, but I thought it was worth mentioning. I wish you well in your investing. Doug