Posted by Stacy (AZ) on October 09, 1998 at 17:17:22:
In general terms, the difference between what the seller owes on the property and the selling price is the amount of equity in the property. Most times, the seller wants this equity in cash when he sells his property. This means that you, being the buyer, need to come up with the cash.
But, what if the seller agreed to take all or part of his equity in installments? You wouldn’t have to come up with the entire amount when you bought the property, but would make monthly payments to the seller for a time period, until the seller got all his equity paid. The most secure way for a seller to do this is to agree to an IOU, or a promissory note, and then secure it against the property. This is a mortgage that the seller will “carry” for you.
The main advantage for the buyer is that less (or no) cash is needed to pay-off the seller’s equity. Very simplistic, but I hope it helps.