Posted by Richard Roop on May 18, 1999 at 10:11:31:
They borrow more money that the purchase price.
Example:
$100,000 price
$70,000 new loan (1st)
$40,000 owner carry 2nd
Gross is $10,000 at closing
You now own a house worth $100,000 and owe $110,000. In this case you are hoping for appreciation and principle pay down over time to balance this out.
But what if you only paid $90,000? That’s fair is there is no realtor to pay and you are solving the seller’s problem.