Question

suppose a buyer agrees to purchase a tract of land for $40,000. the buyer is only able to obtain a mortgage for $32,000. rather than let the deal fall through, the seller agrees to accept $4,000 in cash and a note from the buyer for the remaining $4,000. this type of transaction is commonly referred to as a:

Answer 1

Seller financing or seller carryback is the term used to describe a transaction in which a buyer is unable to obtain a full mortgage for a property and uses a combination of cash and a promissory note to complete the purchase.

Step-by-step explanation:

When a buyer agrees to purchase a property but is only able to obtain a mortgage for a portion of the purchase price, it may be possible to complete the transaction by using a combination of cash and a promissory note. In this case, the buyer agrees to pay a portion of the price upfront in cash and the remaining amount is documented in a note. This type of transaction is commonly referred to as a seller financing or seller carryback. It allows the buyer to still complete the purchase even without a full mortgage, and the seller receives the remaining amount through the note over a specified period of time.

Answer 2

The transaction where a seller helps finance a portion of the property purchase price because the buyer cannot get a full mortgage is known as seller or owner financing. It includes a promissory note outlining repayment terms.

Step-by-step explanation:

The transaction described where a buyer agrees to purchase a tract of land for $40,000, can only obtain a mortgage for $32,000, pays $4,000 in cash, and provides a note for the remaining $4,000, is commonly known as seller financing or owner financing. This is a method where the seller of the property provides a loan to the buyer to cover part of the purchase price. The buyer repays this loan according to terms agreed upon by both the buyer and the seller.

Owner financing benefits the buyer who is unable to secure enough financing from a bank or mortgage lender, and the seller who wishes to sell the property without waiting for the buyer to find additional financing. This arrangement is secured by a promissory note which states the interest rate, repayment schedule, and consequences of default. It's a common solution when traditional financing is difficult to obtain.