Seller Financing Assistance

We have several options on this front:

 

Lease with Option to Buy: 

 

This is two contracts tied together.  We combine an Option Contract and a Lease Contract.  The first (the Option Contract) allows a buyer to agree to purchase and a seller agrees to sell a house at some time in the future for a price agreed upon today.  The Lease Contract is basically a rental agreement that sets allows the buyer to move into the house today and pay rent until he actually buys the house.

 

So here’s how it works:  The buyer wants to buy a house, but may not be able to get a loan right now because of bad credit or financial issues.  Or not sure if they like the house, or maybe they are afraid they might need to move and just are not quite ready to buy right now.  But they don’t want to just pay rent, but want to start building up equity in a house while they work out their issues and become ready to get a loan and buy the house.

 

So they find a seller who is willing to let them buy with a Lease Option.  The buyer and the seller agree to the sale of the house at some future date, usually one to two years from now.  They agree to a price of that sale in the future and right it on the option contract.  The buyer pays the seller an “Option” fee based on the set price of the home.  This fee is usually non-refundable, meaning they can’t get it back and will usually be applied to the purchase price when they finally buy.  If they don’t buy in the future, but move out, they loose their option fee.

 

At the same time the buyer and seller also sign a lease agreement allowing the buyer to move in now at a set rental rate.  The buyer will pay rent to the seller until the actual sale of the home takes place or the buyer moves out.  The rent price is usually mostly just rent, although some sellers will apply a small portion of the rent towards the purchase price when the sale actually happens.  That amount is usually around $50 to $100.

 

So the buyer gets to move into a house now, work on fixing the issues that is keeping him from buying right now.  He also starts building up a little bit of down payment toward that purchase price through the option fee and the small portion of rent applied to down payment.  Then when the issues are resolved, the buyer gets a loan from the bank, buys the house from the seller and everyone wins.

 

If the buyer does not resolve the issues and get a loan with in the time frame of the contract, he moves out and gets on with his life.  He does not have to buy the house, but he will loose his non-refundable deposit and the small portions of rent the seller agreed to credit toward down payment.

 

 

 

 

 

In some instances, the seller may agree to extend the lease option, but may want more money down. 

 

In other instances, if the lease to own buyer has been very good about paying his lease fee on time, every time for a 2 or 3 year period, but is still unable to obtain traditional financing through a bank or mortgage company, the seller may be willing to move them up to a seller financing situation.

 

More info

 

·        wikipedia

·        real estate abc

·        real estate .com

 

Seller Financing

 

This is just like any traditional purchase where a buyer agrees to buy and a seller agrees to sell a house at a set price.  But the seller becomes the bank instead of bringing in an outside loan from a bank or mortgage company.  The buyer gets true ownership of the home, is responsible for everything, upkeep, taxes, insurance, repairs, everything, and the seller gets the buyer’s promise to pay the loan back.

 

This is great for a buyer who can’t quite get a bank loan, but could be risky for the seller if they buyer does not pay.  So you will usually find that a seller will only agree to Seller Financing if the buyer has a substantial amount of money to put down on the house and usually at higher interest rates that they would normally get from a bank or mortgage company. 

 

The length of the loan may also be shorter than what a traditional lender would give and their may be something called a balloon payment due in 6 months, a year or 5 years or sometime into the loan where the seller expects to get paid in full.  This would happen through the sale of the home to a 3^rd person or a bank refinance.

   

            More info

 

·        Financial Web

·        nolo

·        Mortgage Loan.com

 

 

WHEN SHOULD I DISCLOSE A SHORT SALE?

Legal Hotline Attorney Vern Jarboe has been receiving many questions about the correct timing to disclose a short sale. New MLS rules require that short sales be disclosed in the MLS agent comment section when you have actual knowledge. KREC also said that you must disclose the short sale to all parties as soon as you have actual knowledge. But as a listing agent, when is the right time?

 

Here is Vern Jarboe’s opinion:

The need for short sale approval from the seller’s lender may mean that even a full price offer cannot be accepted by seller, and that the time period for getting to acceptance of an offer may be not just hours but days or weeks.   NAR has decided that local MLS must allow members to disclose this fact to other agents and KREC has determined this is a material limitation on the seller’s ability to close a transaction.  

 

Therefore, to avoid the selling agent claiming a commission by virtue of a full price offer, I suggest making this disclosure in the agent comment section of the MLS data.   It would need to be disclosed to buyers at the same time other material defect information is provided, which timing may vary depending on the transaction, but presumably would be at the same time a seller disclosure is provided.  Disclosure should not be later than before the time a buyer makes an offer and therefore needs done early enough to avoid that factor.

 

For a short sale workflow report from the NATIONAL ASSOCIATION OF REALTORS®, click here: http://www.realtor.org/MemPolWeb.nsf/pages/ShortSaleWorkflow?OpenDocument

Seller Financing

If the seller carry’s a the financing for a buyer – what happens.

First of all the buyer / borrower needs to sign a promissory note and a mortgage document or deed of trust depending on your state that is filed in the county records.  The borrower and the lender are bound by the agreements set forth in both documents.

If the borrower fails to live up to the agreement, the lender could take the property back through foreclosure, just as if the lender was a big mortgage institution.  It will go through the legal proceedings and be sold at foreclosure auction to pay off the debt or purchased back by the lender if the sale fails to get a high enough bid.  The lender then will offer the property for sale. It becomes and REO of a private individual rather than of the bank.

In both case the sale at the auction or the sale later after the property being taken back is to cover the debt and what ever does not get covered can be filed against the borrower as a deficiency judgement.

If you sell the property and use a land installment contract or a contract for deed, it would still be treated as an owner finance loan and requre foreclosure proceedings.

To read the Inman Article, click here

Increasing your home’s appeal

Remember the 60-second rule: That’s all the time you have to create a winning first impression. Here are some simple to significant ways to maximize your home’s appeal.

Exterior

* Keep the grass cut and remove all yard clutter.
* Weed and apply fresh mulch to flower beds.
* Apply fresh paint to wooden fences.
* Tighten and clean all door handles.
* Clean windows inside and out.
* Powerwash home’s exterior.
* Ensure all gutters and downspouts are firmly attached and functioning.
* Paint the front door.
* Buy a new welcome mat.
* Place potted flowers near the front door.

Interior

* Evaluate the furniture in each room and remove anything that interrupts “the flow” or makes the room appear smaller. Consider renting a storage unit to move items off-site.
* Clean and organize cabinets, closets and bookshelves.
* Clean all light fixtures and ceiling fans.
* Shampoo carpets.
* Remove excessive wall hangings and knick-knacks.
* Repair all plumbing leaks, including faucets and drain traps.
* Make minor repairs (torn screens, sticking doors, cracked caulking).
* Clean or paint walls and ceilings.
* Replace worn cabinet and door knobs.
* Fix or replace discolored grout.
* Replace broken tiles.
* Replace worn countertops.

Special details for showings

* Turn on all the lights.
* Open all drapes and shutters in the daytime.
* Keep pets secured outdoors.
* Buy new towels for bathrooms.
* Buy new bedding for bedrooms.
* Replace old lamps or lampshades.
* Play quiet background music.
* Light the fireplace or clean out the ashes and light a candelabrum.
* Infuse home with a comforting scent, such as apple spice or vanilla.
* Set the dining room table for a fancy dinner party.
* Vacate the property while it is being shown.

Understanding the buyer

As the seller, you can control three factors that will affect the sale of your home:

* The home’s condition
* Asking price
* Marketing strategy

However, it’s important to note that there are numerous other factors that influence a buyer, and you need to understand these consumer trends when you enter the sellers’ market. The more your home matches these qualifications, the more competitive it will be in the marketplace. Your real estate agent can advise you on how to best position and market your home to overcome any perceived downsides.

Location
Unfortunately, the most influential factor in determining your home’s appeal to buyers is something you can’t control: its location. According to the National Association of REALTORS(r), neighborhood quality is the No. 1 reason buyers choose certain homes. The second most influential factor is commute times to work and school.

Size
While some buyers want to simplify their lives and downsize to a smaller home, home sizes in general have continued to increase over the decades, nearly doubling in size since the 1950s. Smaller homes typically appeal to first-time home buyers and “empty nesters,” or couples whose children have grown up and moved out.

Amenities
Preferences in floor plans and amenities go in and out of fashion, and your real estate agent can inform you of the “hot ticket” items that are selling homes in your market. If your home lacks certain features, you can renovate to increase its appeal, but be forewarned: That’s not always the right move. Using market conditions and activity in your neighborhood as a gauge, your agent can help you determine whether the investment is likely to help or hinder your profit margin and time on the market.