Suppose a buyer agrees to purchase a tract of land for $40,000. The buyer is only able to obtain a mortgage for $32,000. Rather than let the deal fall through, the seller agrees to accept $4,000 in cash and a note from the buyer for the remaining $4,000. This type of transaction is commonly referred to as a:

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This is a purchase money mortgage, which is when the seller provides financing for the buyer to purchase the property. This is different from a conventional loan, which is obtained from a third-party lender. A home equity mortgage is when the borrower takes out a loan using their existing equity in the property as collateral. A reverse mortgage is a type of loan only available to homeowners over a certain age, where they can borrow against their home equity and the loan is repaid when the borrower passes away or sells the property.

Suppose a Buyer Agrees to Purchase a Tract of Land