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Seller financing may save the day!

By Niki Fiala

Real Estate Agent with Great Homes Realty

July 28, 2009 04:09 AM

I have a few listings that are small condos in price ranges around $30-40K.

No matter how much I promote and how many different ways I promote these, no activity.

Recently I discussed with my sellers the possiblity of seller financing, they started considering it, and lo and behold with our new promotion using the seller financing "button", I started getting some good reaches. One of them is supposed to be closing later this week, and another one started getting showings after months of absolutely no activity.

Think of some of your listings that may benefit from this option.

Good day!

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Robert Rauf

CMG Home Loans - Toms River, NJ

Niki, Thinking outside of the box is always a good thing! Congrats.

one problem you have is condo and florida in the same sentence is hardly music to a lenders ears. then you toss in the low loan amount and most lenders may shy away from them all together... Your idea is a great solution to get the properties moving.

Jul 28, 2009 04:14 AM

Jodie Miller, Realtor, KW, Pasadena

Keller Williams Realty - Pasadena, CA

Good way to go, esp. on properties lenders are not so psyched about!

Jul 28, 2009 04:18 AM

Vickie McCartney

Maverick Realty - Owensboro, KY

Broker, Real Estate Agent Owensboro KY

Hi Niki~ Glad to see your thinking out of the box is working and that your sellers are receptive!

Jul 28, 2009 04:24 AM

Nicole Anderson

Lake Homes Realty - Pell City, AL

YOUR Community and Lake Expert

Great idea, though I'm unsure of how it all works in our favor?? Could you give me details on how you make your profit and what is required in order to close it for them... Thanks from Alabama!!

Jul 28, 2009 04:38 AM

Niki Fiala

Great Homes Realty - Clearwater, FL

Your Real Estate Consultant for Life

Thank you all for your comments!

Robert,

you are right part of the problem has been finding a lender that would be willing to touch such a small loan. On $40K there is a 25% down payment requirement, the loan amount is $30K. One of my loan officer contacts at a big bank told me he would make $100 on the transaction and would cost him the same amount of time as a million dollar loan.

Nicole,

The way it works in our favor is:

- as a realtor, I get to sell the property for once

- as a buyer, you may not qualify for financing through a mortgage company or bank, or maybe you prefer getting seller financing to save on closing costs (closing costs are minimal to the buyer on seller financing deals, no mortgage points, origination and underwriting fees, etc.). Most seller financing deals will have a 3 or 5 year balloon payment at which point the buyer has to pay off the balance in full. In 3-5 years he may qualify for a mortgage and be able to refi and pay off the original seller. There are lots of different scenarios, but a lot of times buyers try to dictate the terms of the seller financing and hope to get the seller's agreement.

- as a seller, you get to sell your property in a market where your type of property is just not moving, you only get a partial payment and then you hold a mortgage note, and collect interest for 3-5 years. If the interest rate is pretty good, it is better than selling the property, getting paid and putting the money in the bank to earn 1-2% interest.

Jul 28, 2009 06:10 AM

Anonymous

Roy

Niki

I think what you did was brilliant. Seller financing is always over looked by realtors and property seller who dont know how benefical it really is.

I am a Cash Flow Consultant that liquidates notes on the Secondary Market. Whats good about the way you structure the note is that you place a balloon payment in it which gives it value incase the seller (client) wanted to sell it for cash now.

Let me give you a brief example of how I would create a note on a condo using your sale price. You should ALWAYS try to find buyers with at least 10% down and decent credit 600 + from buyers you will finance. Now I have no idea how you structured the note but you got what you wanted done a sale and a happy client.

Ad ''Low Down Pmt, No Banks, Owner Will Finance Call Now xxx

Condo for sale: $40,000

Down Pmt: $4,000 (10%)

Note: $36,000 8% $301.12 for 20 yrs with a $29,147.81 balloon in 7 yrs

Now its always about the clients we deal with, assuming your client dont need ALL CASH immediately keeping this note will allow him/her to profit handsomely.

Seller would get:

$25,293.95 ($301.12 by 84) + $4,000 Down Pmt + $29,147.81 Balloon Pmt in 7 years for a total of $58,441.76. You have a client that just made a $58,441.76 profit on a $40,000 home. Thats $18,441 more that the asking price.

Example 2:

Assuming one of your client need Cash Now from the same condo, how can Seller Financing help your client? You simply explain to them that they can sell all or part of there note for cash now.

Note: $36,000 8% $301.12 20 yrs Balloon in 7 yrs $29,147.81

And Investors will pay $15,604 Now to receive all the monthly payments of $301.12 for 7 yrs and the balloon payment of $29,147 will go to the seller after the investor gets all the payments.

Let see how the seller came out with this deal.

$15,604 (Sale of Note) + $4,000 (Down Pmt) + $29,147 (Balloon Pmt) Immediately, the seller gets $19,604 at the close of escrow and the balloon in 7 yrs for a total of $48,75. Not as good as the fist example but think of the potential of this technique (Seller Financing) I love it!

yours,

Kenroy Whitley

I am a Cash Flow Consultant that specialize in Notes and Cash Flows and can be reached for free consultation at 954 822 1078 or kenrino4@bellsouth.net

Sep 20, 2009 08:12 AM

Niki Fiala

Great Homes Realty - Clearwater, FL

Your Real Estate Consultant for Life

Hi Kenroy,

Very interesting. Thanks for the data. I will keep your contact data in case I run into somebody that may need this.

We ended up selling it with a 3 year balloon, 10% interest and $10K down payment. The buyer's debt to income ration was high, and my seller did not want to take a big risk by taking too low of a down payment.

It all worked out though in the end.

Best, Niki

Sep 21, 2009 05:57 AM