Today I received an email from a prospect inquiring about seller financed homes and it went like this:
I have good credit and the 5/% down, also the aproved loan from the Bank, but I am looking for better deal thant the one the bank offer me, and lower price on a 3/2/2 on a place that I may like it.
Please let me know your prices, and your interest rate, and all yours condition.
Here is my emailed response, which I followed with a call:
Often Seller Financed homes sell for higher than homes with conventional financing. This is because they have creative terms that makes these homes available to buyers who are unable to obtain a bank loan. The other thing that is common is for the Seller Financed rates to be higher than bank rates. For example the Seller Financed homes I’ve seen recently have rates anywhere from 6.5% to 10%, whereas the bank rate for a 30 year fixed rate mortgage is hovering 4.5% at the moment.
If your credit is good, and you are able to secure a bank loan, that is most likely going to be the best deal for you out there right now. I would caution you not to wait too long for the “big deal” for two reasons: With talk of the US credit rating being downgraded there is a very strong likelihood that mortgage rates will increase significantly. The second reason is that home prices in our area seen to have stabilized, and more than that listing prices and selling prices are on the climb, having increased 5% in July. Because Florida was ahead of the market in the real estate melt down, most suggest that it has already hit bottom. If you are looking for a better deal than those already out there, you may miss out entirely.
If you are serious about bidding on a home, and want to have a shot at having an offer accepted, your Realtor can help you put together the best initial offer, based on what is going on in the marketplace currently.
Good luck in your home search. Let me know if there is anything else I can do to help you.
What struck me most about this exchange is that with mortgage rates as low as they are, and with home prices where they are...some people like the gentleman above are still holding out..waiting for the "big deal". Turns out the prospect did not want to pay the bank fees, appraisal fees and so on...hoping to save $2000.00 in the process. What he failed to understand was that in X number of years, when his seller financed home loan balloons..he is still going to have to secure a bank loan. What the interest will be in X years is anyone's guess.