Daniel Chen sells his duplex to Olivia Bell, delivers the deed at closing, and takes back a note secured by a deed of trust for part of the price, payable to him in monthly installments. Olivia funds the balance with a bank loan. What is this financing method called?
Correct Answer
D) Seller financing
When the seller supplies the credit for part or all of the price instead of requiring the buyer to bring cash or an institutional loan for the whole amount, the arrangement is seller financing, commonly called a carryback. Here the deed passes at closing and Daniel holds a note and deed of trust for his share of the price, which is the ordinary carryback structure. It differs from an assumption, where the buyer takes over the seller's existing loan; from a land contract, where the seller keeps legal title until the installments are paid; and from a wraparound, where the seller's new note includes the balance of an existing loan that stays in place.
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