Question: What is a seller "take-back?"

Answer: A seller "take-back" works like this. A home is worth $100,000 and has an assumable $60,000 mortgage. You assume the mortgage. Instead of taking $40,000 in cash from YOU, the seller instead takes back a note, secured by the property. For example, the seller might take-back a note for $30,000 if you will put up $10,000 in cash.

A seller take-back is just like a loan from any lender. It must be repaid according to the terms and conditions outlined in the note. If not repaid, the property can be foreclosed.

The rules which apply generally to mortgages may not apply to seller take-backs. For example, some attorneys argue that a seller take-back is not subject to state usury rules (interest rate caps) because a seller take-back is NOT a loan -- no money changed hands.

For details, have an attorney review take-back loan papers before signing.