I love my job. I get a thrill showing people how to do what others would say is impossible, especially when it comes to the ownership of Real Estate.
I have learned in life that the old adage is true: "Nothing ventured, nothing gained" especially when it comes to real estate. And until you run the numbers for people, they truly don’t know what is possible.
I have a friend here in the San Francisco Bay Area who came into an inheritance and she called me for advice about buying real estate. Blithe* had already started looking at property. Not just any property, she is a recording artist and needed a large place to house herself and allow her to set up a recording studio.
This gal is a multi-talented woman who can tile a bathroom, build an instrument, write songs, play multiple instruments, record the music and (at one time) walk a tightrope and skateboard on her hands! My husband had signed her to her first major recording deal back in the 70's on Elektra Records. The blonde genius was in Joni Mitchell's league. I'll let my husband blog about that one sometime.
Back to the present day and our story: She wanted to know how much to put down and what her total payments would be. Since I am a mortgage planner we would start by looking at her income, assets, and credit, amount of time she planned to keep the property, as well as the property’s sales price, income and operating expenses.
Now here come the part where the process would end with your average mortgage broker: I ran her credit and came up with a score in the 500’s. We discussed her credit score and it turned out that her mother, who had recently died had handled the finances in their joint business and she was naturally devastated when her mother was killed in a car accident and had missed enough payments to send her credit into the subprime zone.
So I said "Blithe, the only way you are going to buy a property is to find a seller who will loan you the money". I didn't think about it at the time, but that advice would have stopped a lot of buyers in their tracks. But sending her off to find seller financing seemed so natural, I mean this woman had thus far accomplished anything she set her mind to.
So off she went looking at property and soon called me to say she found something, her dream place, a former cigar factory, and it was owned by a visual artist. When she later met the seller, they bonded because they are both mature strong women artists.
To make a long story short, since I was a licensed Realtor way back when I was 18 years old, I gave her some language for her offer including an interest rate that was a bit higher than the going rate due to her credit score and to compensate the seller for carrying the loan. Her Realtor, another amazing woman put it in writing, and handled the protracted negotiations.
The seller agreed to carry the loan and my friend put 20% down and is now the proud owner of her dream home, a 12,000 square foot building in Oakland, CA with a few apartments configured inside that are filled with creative people like herself and finally, enough room for the instruments, art, furniture, and clothes she's been collecting for many years. And to top it off, it even cash flowed. She had always dreamed of having a space like this of her own and finally it became a reality.
The seller's attorney required that Blithe take out an insurance policy for the loan balance that named the seller as beneficiary and he also required her to put a few years payments in a separate account as a safeguard he insisted upon to protect the seller.
You might ask, "Why does the seller need that? She could just foreclose if Blithe missed payments." True, but no one wants to go through that hassle and since her credit score was low, the seller’s attorney was looking out for his client.
I did not make a commission on the financing, but I did do a loan for her brother and I’m proud to have helped my friend realize a lifelong dream.
Now I’m working on getting my neighbor to buy the home she rents by asking the seller to credit part or all of her five years rent towards the down payment. She qualifies for conventional financing and will most likely go that route, but I did show her how to propose to the seller that he carry financing too. Like I said, “nothing ventured, nothing gained.” Stay tuned!
*Name changed to protect her privacy."