Wrap around Agreement Meaning

What is a Wrap Around Agreement and What Does it Mean?

A wrap around agreement is a type of real estate financing arrangement where the seller acts as the lender for the buyer. This means that the buyer takes out one loan from the seller that covers the original mortgage as well as any additional amount needed to purchase the property. In other words, the seller is “wrapping” their existing mortgage loan around the new loan provided to the buyer.

This type of agreement can be beneficial for both parties involved. The buyer may have difficulty obtaining a traditional mortgage loan, but the seller can provide financing based on their own terms. This can be particularly useful for sellers who want to sell their property quickly without the need for a lengthy mortgage process. Additionally, buyers who have a low credit score or a lack of credit history may find wrap around agreements to be a viable option.

However, it’s important to note that wrap around agreements come with some risks. The buyer is essentially taking on the seller’s mortgage, which means that if the seller defaults on their original loan, the buyer could potentially lose their investment. It’s important for both parties to have a clear understanding of the terms and conditions of the agreement before entering into it.

In order to protect themselves, buyers should ensure that the seller’s mortgage payments are up to date and that there are no liens against the property. It’s also a good idea to work with a real estate attorney or a financial advisor to ensure that the agreement is legally binding and properly executed.

In conclusion, a wrap around agreement is a financing arrangement that allows a buyer to take out a loan from the seller for the purchase of a property. While this type of agreement can be beneficial for both parties, it’s important to understand the risks involved and to work with a professional to ensure that the agreement is legally sound.