What type of loan is a carryback loan?

A carryback loan is characterized as a seller-financed loan where the seller provides financing to the buyer to help facilitate the purchase of a property. In essence, the seller acts as the lender and extends credit to the buyer, allowing them to pay a portion of the purchase price over time rather than upfront or through traditional financing methods such as banks or mortgage lenders.

This type of financing is particularly useful in real estate transactions where buyers may face difficulties securing loans from banks due to strict lending standards, or when sellers want to expedite the sale process by providing more flexible financing terms. In a carryback scenario, the seller retains a lien against the property until the loan is repaid, hence the term "carryback."

Understanding this financing structure highlights the advantages for both parties: the seller may receive more offers or higher prices, while the buyer can secure a purchase when traditional lending routes are not available. This context helps clarify that the other options involve different types of loans that do not align with the specific nature of a carryback loan.