Here is a guest authored article, by Ken Moll of GGB Capital. Ken specializes in Seller Financing. Is it right for you to consider when you are selling your home? Possibly. Read on.
In today’s tough, tough market for sellers and buyers alike, sometimes it takes going the extra mile to get a property sold (or purchased). Historically, when you’ve wanted to sell your home, you know the drill: contact your agent, develop a plan for preparing your home for market, prepare a complete and thorough set of property disclosures, price it properly and present it to the market. What’s changed in today’s market? In addition to the activities you’d normally perform, now you may need to think about something we’ve always taken for granted: how to finance the sale or purchase. We’ve always relied on our friendly banker or mortgage broker to help us out. But now conditions are different. 50%, 60%, or maybe even as high as 75% of buyers who could qualify for a traditional mortgage three or four years ago can’t get one today. Sure, some of them never deserved one, but don’t you think there are just a few deserving buyers among these “near-missed” borrowers that as sellers we’d love to have come look at our properties and maybe make us an offer when no one else seems to be if we applied realistic lending standards? Well, there is a way.
There is a substitute for traditional financing that’s usage is growing rapidly and helping to fill the void left by the implosion of the banking sector. That substitute is seller financing. It works for more than half of both residential and commercial property owners out there who still have enough positive equity in their property to act like a lender and offer private financing to open the doors to a larger potential market for all the “near-missed” buyers. Again, it’s not for everyone and there’s natural resistance because we don’t understand it and are fearful of something we don’t understand. Yet, there are a small but growing number of Seller Finance Specialists out here who are literally helping thousands of property seller and buyers alike walk through the process and offer them the confidence they need to open this door and welcome more interested buyers. Here are a few tips you should consider as you evaluate this concept and prepare yourself to answer some tough questions:
Q: Is seller financing for me?
A: It could be, unless you are underwater or upside down on the property, it might work. As long as you have at least 20-30%+ of equity in the current market value of the home, it’s something you should at least consider – and that’s about half of all homeowners out there.
Q: Where can I get information to evaluate if seller financing is appropriate for me?
A: You start by speaking with your Realtor, reading articles online, and/or contacting someone like me who can help you think through the issues and reaching some form of opinion. Just because you are thinking about offering your own financing doesn’t oblige you to provide it in the end. It all depends on several important factors.
Q: What are these factors I need to think about if I want to offer seller financing?
A: Beyond the initial question “Do I have enough positive equity in this property to make it work?” I encourage you to think about the five elements that collectively determine how you create a more valuable seller financed note. They include the need to consider and/or gather the following information: 1. The buyer’s credit history, 2. The appraised value of the property, 3. The percentage of the Buyer’s down payment, 4. The interest rate and term of the note, and 5. The quality of the paperwork. With the right amount of effort provided by your Realtor and your Seller Finance Specialist, and under the right set of circumstances, seller financing might just be a viable solution to allow you to sell (or buy) a property and move-on with your lives. Anyway, it’s certainly worth a little investment of your time as it may just help you sell your property more quickly and at a fuller-price. And next time, paint the outside of the property first before listing it. There shouldn’t be any debate about this point because we know it helps improve the curb appeal….
For more information about seller financing and to determine if it is an option you should consider, contact me or view my instructional video to learn more.
(Please consult with all of your appropriate financial advisors to determine if Seller Financing is a good option for you.)