DEAR BOB: What is a seller carryback mortgage, which you often mention? –Mary J.

DEAR MARY: When you buy a property and the seller finances all or part of your purchase price, acting like a mortgage lender, that is called a seller carryback mortgage.

Purchase Bob Bruss reports online.

Sellers often carry back mortgages to facilitate the sale, earn interest income on the unpaid balance, and create a safe investment secured by a mortgage or deed of trust on the property they just sold.

Many retirees especially enjoy carrying back mortgages for their buyers because the retiree then has safe retirement income at a higher interest rate than usually can be earned elsewhere.

In today’s home sales market, for example, if you buy a free-and-clear house with a 10 percent cash down payment, the seller could then carry back a 90 percent first mortgage. If you offer the seller a 6 percent interest rate, that’s a “good deal” for both you and the seller.

Should you default, the seller can then foreclose and either get paid in full by a bidder at the foreclosure sale or, if there are no bidders, get the property back to sell for a second profit.


DEAR BOB: I own rental property that I plan to sell, as I will be retiring in the next year or two. I would like to use the profits to help my son buy a home. Most likely I will need to be part of the purchase as he will need my credit and income to qualify for a mortgage. What is the best way to avoid tax on my rental property sale? –Evelyn E.

DEAR EVELYN: The only way to avoid tax on the sale of your rental property is to make an Internal Revenue Code 1031 tax-deferred exchange for another business or rental property of equal cost and equity. That doesn’t sound like what you want to do.

If you sell the rental property to raise cash to help your son buy a home, your capital gain will be taxed at the federal 15 percent tax maximum tax rate, plus the special 25 percent depreciation recapture tax rate, plus applicable state tax.

What you do with the cash, such as helping your son buy a home, is irrelevant. For details, please consult your tax adviser.


DEAR BOB: I am a 74-year-old homeowner, still working because I can’t afford to retire. Also, I enjoy my job. My house is free and clear. But it needs a new roof, and I need a new car. My banker suggests a home equity loan. However, a co-worker suggests a reverse mortgage. What do you suggest? –Herb W.

DEAR HERB: If you take out a home equity loan, you will have monthly payments to make. However, if you instead obtain a reverse mortgage and use part of your entitlement for a new roof and a new car, you won’t have any repayments as long as you continue living in your home.

When you decide to retire, you can use the balance of your reverse mortgage for lifetime monthly income, a credit line (except in Texas), lump sums as you need cash, or any combination. I suggest you listen to your friend and investigate a reverse mortgage.

The new Robert Bruss special report, “Five Easy Ways to Buy Your Home and Investment Property for Nothing Down,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription