Navigating Vendor Take-Back Mortgages: Five Key Considerations

Creative dealmaking is essential to keep transactions moving in today's dynamic commercial real estate market. One increasingly popular strategy is the use of vendor take-back mortgages or VTBs. A VTB is a financing arrangement whereby the vendor lends money to the purchaser, allowing the purchaser to pay only a portion of the purchase price on closing without needing to borrow money from a third-party lender.

Here are five key considerations for successful VTB arrangements:

1. Using VTBs Effectively. VTBs can benefit both buyers and sellers in certain situations, including as a buffer against rising or uncertain interest rates. VTBs are often used when traditional financing is challenging to obtain in time for closing or when the seller wants to take financing off the table as a purchaser issue.