Alternative Financing May Be the KEY to Selling Your Home!

Seller financing eases sale

Motivated sellers with no mortgage are prime prospects to offer financing.

You already know that the current home buyer's market -- with more homes listed for sale than there are active buyers searching for residences -- in most cities is a great time to purchase a home.

But there's another reason to buy a resale house now. Anxious sellers are offering sales incentives. A few offer vacation trips, higher sales commissions to buyer's agents and even automobiles as inducements to realty agents and their buyers.

However, there is one sales incentive that most listing agents and home sellers forget to offer: seller financing.

Especially if you are a cash-challenged or credit-challenged home buyer, you will love this finance source.

With more than 50 percent of U.S. homes owned free and clear with no mortgage, those homes are the best candidates for seller financing. Smart home purchasers ask their buyer's agents to search the local MLS (multiple listing service) listings for homes listed with no existing mortgage. Those sellers are the best prospects for seller carryback mortgage financing.

Having bought dozens of investment rental houses with seller financing, I have found that my best experiences have been with motivated retiree sellers who need more retirement income.

Instead of sellers taking an all-cash sale and parking the cash in a bank or mutual fund earning around 5 percent interest, suggest that the seller of a free-and-clear home carry back the mortgage at 6 percent. That's a good deal for both seller and buyer.

Whenever possible, try to meet the home seller to establish credibility before presenting a purchase offer asking for a seller-financed mortgage.

In addition to earning a high above-market interest rate, there are many additional seller advantages of financing the home sale that include:

Easy quick sale for top dollar. As every merchant and car dealer knows, sales are easiest when the merchandise seller offers easy financing. The same principle applies to home sales where sellers offer easy financing. Price often becomes a non-issue.

Vacant houses can be risky for home sellers. If the seller has moved out of the house, this is usually a sign of a very anxious and worried seller, especially if the house has been listed for several months. Most sellers of vacant houses will listen to reasonable purchase offers, including seller carryback mortgage terms.

For example, I usually ask for a 20-year seller carryback mortgage. But if the seller wants a shorter term I reply, "Well, let's amortize the mortgage over 20 years but include an option for you to call the loan due in 10 years." After 10 years of on-time mortgage payments, sellers rarely exercise that option.

Safety of a mortgage or deed of trust on property the seller understands. The major reason home sellers hesitate to carry back a mortgage for their buyer is they fear the buyer will default and not make the monthly payments.

I emphasize this often-unstated fear and explain that when a buyer defaults, the seller then can foreclose and either get paid off at the foreclosure sale by a cash bidder or get the home back to resell for a second profit.

Installment-sale tax benefits are another seller advantage, especially when the taxable profit exceeds the seller's $250,000 or $500,000 principal residence sale tax exemption. If the property was not the seller's principal residence, spreading out the capital gains tax over the years of receiving buyer payments is usually far better than paying a large capital gains tax in the year of the sale.

Down-payment cash to pay the home sales expenses. In a typical home-seller financing, the buyer makes a cash down payment of 10 to 20 percent of the sales price. This down payment is usually sufficient to pay all the sales expenses, including the realty agents' sales commission.

Even after explaining all the seller benefits of financing the home sale, some unmotivated sellers are hesitant to carry back a mortgage on the house they are selling.

"Convincer methods" that worked for me include (1) offering to prepay six to 12 months of mortgage payments at the closing (instead of a large down payment); (2) providing a year's post-dated checks so the seller can deposit a check on the first day of each month and/or (3) giving the seller a copy of my credit reports and FICO (Fair Isaac Corp.) score obtained at www.myfico.com.

FOR MORE INFO ON FINANCING CONTACT ME TODAY!