This form is used by an agent when preparing an offer or counteroffer to buy, sell, exchange or option a one-to-four unit residential property with seller carryback financing on a grant deed conveyance, to prepare an addendum to disclose the terms and conditions of the carryback note and trust deed.
Carryback financing
Seller financing, also known as carryback financing, occurs when a seller carries back a note and trust deed executed by the buyer to evidence a debt owed for purchase of the seller’s property. [See RPI e-book Creating Carryback Financing]
A seller who offers a convenient and flexible financing package to prospective buyers makes their property aggressively more marketable and defers the tax bite on their profits.
For buyers, seller carryback financing offers:
- a moderate down payment;
- competitive interest rates;
- less stringent terms for qualification than those imposed by lenders; and
- no origination costs.
Seller financing is documented in a variety of ways, including:
- land sales contracts;
- lease-option sales;
- sale-leasebacks; and
- trust deed notes.
A carryback seller assumes the role of a lender at the close of the sales escrow. This includes all the risks and obligations of a lender holding a secured position in real estate.
The secured property described in the trust deed serves as collateral for the debt. The property itself is the seller’s sole source of recovery to mitigate the risk of loss on a default by the buyer.
Disclosure on seller carrybacks
A seller who partially finances the sale of their one-to-four unit residential property by carrying back a note and trust deed obtains an agent to locate a prospective buyer. The seller’s agent prepares an offer on a purchase agreement form. [See RPI Form 150]
The seller’s agent also prepares a Financial Disclosure Statement addressing the carryback mortgage, also known as a carryback disclosure statement, and attaches it as an addendum to the purchase agreement. [See RPI Form 300, 300-1 and 300-2]
The addendum contains numerous statements about the financial, legal and risk-of-loss aspects of the carryback mortgage for the buyer to consider and review with their agent.
When the statement is not included as an addendum to the purchase agreement, a statutory further-approval contingency allows for later cancellation of the transaction. [See RPI e-book Real Estate Practice Chapter 36]
The information entered in the carryback disclosure statement is based on the terms of the:
- purchase offer;
- title conditions;
- activities to be undertaken by the buyer and seller in escrow; and
- information obtained from the buyer.
The carryback disclosure statement contains only the legislatively mandated minimum disclosures. [Calif. Civil Code §2956]
All brokers in transactions for the purchase of one-to-four unit residential property involving seller carryback financing are mandated by statute to:
- prepare a carryback disclosure statement; and
- present it to both the buyer and seller for their review and signatures. [CC §2956]
An agent uses the Financial Disclosure Statement for Entering into a Seller Carryback Note published by RPI (Realty Publications, Inc.) when preparing an offer or counteroffer to buy, sell, exchange or option a one-to-four unit residential property with seller carryback financing on a grant deed conveyance. It allows the agent to prepare an addendum to disclose the terms and conditions of the carryback note and trust deed. [See RPI Form 300]
Form navigation page published 09-2021.
Form last revised 2016.
Form-of-the-Week: Financial Disclosure Statement – For Entering into a Seller Carryback Note – Form 300
Article: Disclosures on seller carrybacks
Article: Carryback arrangements facilitate a sale, Part I
Article: The due-on threat prevents seller carrybacks
Brokerage Reminder: Carryback financing – securing alternatives for buyers and sellers
Brokerage Reminder: Carryback financing – the creditworthy buyer and mandated disclosures
Client Q&A: What is seller carryback financing and what are its benefits?
FARM: Attention Note Holders and Carryback Sellers!
Recent Case Decision: May a carryback seller collect the balance remaining on carryback debt when the property has been sold in a nonjudicial foreclosure?
