Archive for July, 2009
FSBO – For Sale By Owner – Asked to Carry a Note
July 29th, 2009 categories: Land Trusts, Seller Financing
This is a typical scenario for FSBO’s and if they’re willing to be flexible, they can often create a winning transaction in today’s market:
Hi, Dawn:
Thank you for the wealth of information in your website. I’ve learned a lot, but I still have so many questions.
I’ve been trying to sell my rental property in California for a few months now. It has 2 houses in 1 property, about 2/3 ac, in a good neighborhood, built around 1940s, great rental income ($1,775/month), etc. I have it listed at Craigslist for $299,000 and I have an FSBO sign in front.
I’ve been getting a lot of interest, but almost all of them ask if I will carry the note. I don’t know much about this, only that it sounded really scary. When I tell them that I am not interested in carrying the note, I never hear from them again.
What should I do?
My current mortgage on it is about $256,000 (about $1,600/month not including property taxes and insurance). I’ve only been paying the interest and the interest will be increasing (I think) next year.
I listened to your 9-minute video, but I’m still undecided what I should do. How does seller financing work? Should I modify my loan to a 30-year fixed before I do seller financing? If the buyer gives me a down payment, what should I do with it? If I sell the note, will I need to pay my current lender the entire amount that I owe? So should I keep the down payment just in case I’ll need to pay off my entire loan or can I use it to purchase another property? How long should I hold the note?
How much do you charge to handle the seller financing transaction? I appreciate your advice. Thank you.
Regards, Flor
Hi Flor,
Yes, offering seller financing is really a powerful way to move a property in today’s market, and you need to seriously protect yourself and use the right strategy.
It sounds to me like you should probably get good long term financing in place (especially if it’s †easy for you to do), then you can pass that on to a potential buyer through the Title Holding Land Trust.
You should get some cash at closing, and a perhaps some positive cash flow each month. It depends on how we structure everything.
You would start by hiring me as a consultant.
Dedicated to help you empower yourself in today’s market,
Dawn
Be sure to sign up for: “Seller Financing on Steroids: Pumping Paper for Power, Peace and Profits“ . Defer capital gains & sell fast for top dollar, regardless of market conditions (and have a note that’s worth something!)
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Owner Will Carry – Published in the Pasadena Independent, and the Monrovia, Sierra Madre and Arcadia Weeklies
July 23rd, 2009 categories: OWC Properties, Seller Financing
I just got back from Seattle. A client of mine decided to pay for a ‘platinum’ consultation, my plane ticket, and excellent wine.
Why?
Because, despite the fact that the real estate market in King County is stronger than most, values have fallen for the upper end properties. It’s hard to move a property that’s listed above $1,000,000.
This is partly due to the limited financing available in the jumbo arena. Loans above $700K can be a lot harder for even highly qualified buyers to obtain.
So, this seller decided that he wanted to offer seller financing (advertise ‘Owner Will Carry – No Banks Needed‘) to maximize the price he could get for his house.
He also wanted me to interface with local Realtors on his behalf.
A year ago, he could have sold anywhere from $1,200,000 to $1,500,000. Today’s comparables suggest a list price of $900,000. He really wants to get at least $1,000,000.
It’s very possible that he will be able to inch toward the million he wants by offering terms.
While I was there, I took 2.5 hours of raw video which I edited into three 10-minute segments. One was an informal virtual tour to showcase the property in a very personal way.
It portrays the human story behind the impending real estate transaction, which creates emotional appeal and allows a deeper connection between the property and prospective buyers.
Another shows conversations with local Realtors, and the last focuses on conversations with the seller and why he was opting for seller financing.
His struggle represents one I hear from many sellers in his position.
He was counting on the sale of this property to
fund a major portion of his retirement, so the steep decline in market value
really hit him below the belt.
He wants to unplug from the ‘Rat Race’ and live a very simple lifestyle in Spain for the foreseeable future.
Without a substantial wad in the bank, it would be nerve wracking for him to do this.
For this reason, even though he had hired me to set up an owner financing transaction, I grilled him on whether or not seller financing was the way for him to go. If he only got a small down payment, say $100K, then that’s not much of a life cushion.
Even if he had to take $900K to attract a conventional sale (cash to new loan), he could still pocket at least $250K, which is a much better safety net.
A bird in the hand can be better than two in the bush.
What if he carries the financing and there is a natural disaster? What if Microsoft moves out of the area? Even with excellent underwriting, these types of events could really jeopardize the extra $100K equity he is trying to preserve by carrying (offering seller financing).
Even after I battered him with tough questions, he maintained that while he needed a decent amount of cash in the bank, he also needed to feel like he got a fair price out of the property, and he was willing to take the risk.
We determined that he would only take terms if he could get at least a 15% down payment. Depending on the deal, he may even be able to retain a portion of any appreciation that happens between now and the end of the seller financing term.
In our local area, there are many pockets of high end properties that just aren’t moving that well. Sometimes it’s worth exploring all the alternatives that are available.
Be sure to sign up for: “Seller Financing on Steroids: Pumping Paper for Power, Peace and Profits” (it’s up there at the top of the site!). Defer capital gains & sell fast for top dollar, regardless of market conditions (and have a note that’s worth something!)
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Best Financing – Small Down Payment – for Canadians Looking to Buy U.S. Real Estate
July 20th, 2009 categories: Land Trusts, Seller Financing
Seller financing strategies work especially well for non-U.S. residents wanting to buy property here. I recently received this email:
“Hello,
We’re Canadians interested to purchase residential and/or commercial properties in the US (Florida – Kissimme/Orlando/Ft. Lauderdale or Boston areas) with the least down payment. We’re looking for the best financing option. We’re based in Toronto.
We’d appreciate it very much if you can help us on this.
Thanks very much.
May”
Dear May,
There are many ways to put a deal together without conventional financing, however, you must understand that you will have to stick with properties that are NOT corporate owned… no short sales or bank REO foreclosures. They always want cash or cash to new loan in exchange for a low price.
Statistically, one-third of residential properties in the US are owned free and clear, or have very small mortgages. There are many more that have attractive long term financing that they could potentially leave in place for you.
The particular strategy that will be most effective for you will be determined by the unique circumstances of your transaction. There is no ‘one size fits all’ approach.
A straight seller carry back with a note(s) and deed(s) of trust (which the seller can sell at some point) may work. But in many instances, using the Title Holding (Land) Trust will give you the best options for getting in with the lowest down payment possible, and give you the ability to take over existing financing without risking negative repercussions.
I am available on a consultation basis. If you choose the comprehensive option for $495, then I will be available to help you negotiate the opportunities you will be interested in until you are able to consummate a successful transaction.
You may want to sign up for ‘Seller Financing on Steroids,’ to become more familiar with seller financing, and to have access to specific details of transactions that I am helping other sellers and buyers put together.
Best wishes,
Dawn
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