Creative Financing Tips to Sell your Home Fast
There is no doubt about the fact that trying to sell your home in the
current market can be challenging to say the least. Of course, it has
become more difficult to buy homes as well, which has contributed to the
sluggish market. While there is an excess of available homes on the
market, the buyers who would normally jump at the chance to take
advantage of lower interest rates as well as prices are having trouble
obtaining financing due to the tightening of underwriting regulations.
The solution to this problem is for buyers and sellers to join forces in
order to achieve their goals. A trend known as ‘creative financing’ can
be just what you are looking for in the current market whether you are a
seller who is having trouble selling your home or a buyer who has found
it difficult to obtain a mortgage loan.
Creative financing gives you the opportunity to expand the pool of
people who are not only willing to buy your home but also those who can
buy your home. If you rely only on those buyers who are able to obtain a
standard mortgage, you could find yourself waiting longer than you want
to sell your home.
Keep in mind that by offering creative financing buyers who are not
necessarily letting yourself open to potentially troublesome buyers.
There are many, many responsible buyers out there who are more than
capable of meeting their mortgage payments on time; however, they are
simply unable to qualify for a standard mortgage because lenders have
become more cautious regarding underwriting guidelines in face of the
softening market.
One easy way to offer creative financing to prospective buyers is to
check with your current lender, provided you still have a mortgage, and
find out whether they will allow what is known as an assumed mortgage.
This type of financing allows the buyer to basically take over your
mortgage including your interest rate and terms. You will need to
negotiate with the buyer regarding the amount of money in cash you want
to receive for the property, especially if you have significant equity
in the home.
In the past, assumed mortgages have been difficult to obtain. In some
cases it is now changing; however, as the market becomes more
challenging. You may find that it is quite possible to negotiate terms
on an assumed mortgage with the lender, especially if you are a
homeowner that is experiencing financial trouble. The lender will often
recognize that it is far better to allow the mortgage to be assumed than
face the prospect of foreclosing on the property.
Another option is to offer financing to the buyer on your own. If you do
not have a mortgage on the property this can be a good situation as it
will provide you with residual income for some time to come. You can
receive a lump cash payment in the form of the down payment. Once the
contract has been completely paid, the deed can be passed right along to
the buyer. This type of arrangement works best for buyers who have
relocated but have not been able to sell their other property yet;
making it difficult to qualify for a mortgage and buyers who are going
through a divorce and may have their assets and home tied up in the
divorce proceedings.
You might also consider offering partial financing. With this option,
the home seller makes a portion of the financing available. This usually
takes the form of second mortgages and seller carrybacks. For example,
the bank might lend 80% of the total purchase price, with the seller
offering 10% of the down payment and the buyer offering the remaining
percentage.
You might also consider assisting the buyer who has difficulty coming up
with a down payment through a lease to own agreement. In this type of
situation, the buyer pays you a lease on the property and a specified
portion of the lease goes into a special fund to cover the down payment.
You will need to specify all of the terms of the deal in the lease
agreement up front, including how long the property is to be leased. In
most cases, this time period ranges between one and three years. Some
sellers are also considering lease options, which allows the buyer the
option to choose whether they want to buy the property or not at the end
up the option period. If they choose not to buy the property they will
typically lose the cash that has been built up. If you choose either of
these options, it is a good idea to hire a real estate attorney to make
sure that your interests are protected.
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