April 25, 2008
Where is the LOVE?
Anyone with a property to sell these days seems to be looking for that edge, that POP, that something extraordinary that will cause prospective buyers to take notice and BUY. Just read the most recent story posted in our "Articles" section to see what I mean. Not only is there a surplus of properties for sale, but financing is getting harder and harder to obtain. For many sellers, it's time to step out of the box and consider financing their buyers themselves.
As I read through the article "Home for sale by any means", I just knew (or maybe it was just misguided hope?) it would mention seller financing as one of the "means". Nope...the closest it got was suggesting a lease-purchase option. As some of the sharpest minds in our industry have said time and time again, the best way to generate interest in a property you have for sale is to add the line "Owner will finance" to the sign.
Owner financing won't work in all instances. The best proposition is if you own the property outright. That way you can set the sales price, the terms of the note, etc., without worrying about an underlying lienholder. If you owe money on the property, most buyers will insist their lien be in first position, and that they will be vested in title. This requires you to pay off any monies owed on the property ahead of time, which isn't always an option.
The benefits of seller financing: First, you will typically get a better price for your property, since you are eliminating the need for the buyers to seek out financing from a third party. Second, you can charge a higher interest rate than local institutions. This is especially important if the buyers have credit challenges that would prohibit them from getting conventional financing. You are taking the risk - you deserve to get paid for it! Third, you can always (if you follow the guidelines in the last paragraph below) sell your note to a company like ours in the event you need a lump-sum cash payment.
Banks don't want to lend money right now. Let me clarify; banks don't want to lend money to anyone that isn't a "PRIME" borrower. Read the earnings reports from companies like Citi, Washington Mutual, or Bank of America, or easier yet, compare their stock prices today to eighteen months ago. The subprime debacle has killed their earnings. Essentially there are no more 'subprime' lenders. So how do borrowers with a few dings on their credit report buy a house in this day and age??? 1) THEY DON'T, or 2) SELLER FINANCING.
As I've mentioned in prior blogs, you still need to protect yourself if you are considering financing the sale of your property. CHECK CREDIT. VERIFY INCOME. GET A SUBSTANTIAL DOWN PAYMENT. Ensure the buyers' WILLINGNESS AND ABILITY to make their payments. Do all these things, and among all the for sale signs in the neighborhood, won't it be nice to slap the "SOLD" sign over yours?
Our efforts stay focused on note holders. If you are a note finder, a note
broker, or anyone other than the actual note holder, please do not contact