Different home sellers call me daily wanting me to buy their homes. After the first couple years, I started to generate some various thoughts. Now, I understand that selling real estate probably does take some years to get to the point that you are fully proficient in all aspects of the business.
However, it still amazes me when I find out that certain questions were never asked by a listing agent, who had previously listed a seller's home. Please don't take a defensive posture. This blog post is mean to HELP, not HURT....also, as time is a premium...this is Part 1 of maybe 3 or 4.
Item#1-Free and Clear Homes- Around my area, approximately 30%-45% of the homes that are owner occupied are owned free and clear. I do not recall the exact percentage, but I found it on the US census beureau websites. Anyway, what I am getting to:
A typical transaction is....house is "worth" 100K, it gets listed for 100K by an agent, and they are looking for a buyer for $100K. Please understand that the homes "value" of $100K is based on what a home would sell for, in cash terms, exposed to the market at a reasonable amoutn of time.
Have you asked the seller if they would be willing to carry the financing? I know the thought sinking in the back of your head...well, how will I get paid a commission? Many ways.
First, it's possible the seller would be willing to pay it, even on a 0% down deal, but it would be VERY rare, I'd suspect.
Second, buyer pays 10% cash, seller hold 90% financing. Covers typical agent commissions and transfer taxes, etc.
Third, buyer borrows 10% down from bank, and seller holds 90% financing. Same as second, but seller is holding a 2nd mortgage and buyer is borrowing all funds, not just the 90%.
Now, time is running out, but I promise, I'll work on adding more over the next 1-2 weeks.
What I am getting at.....banks may not be lending, but there are MANY owners who NEED to sell their properties, and not all of them need cash, or all of it from the transaction. It will allow you to get paid, solve the seller's needs, and help a buyer avoid a bank financing situation.
Don't think for a second that just because your buyer proposes this type of deal, that it is because the buyer's financial statement may not be great. NOT TRUE.
Also, many seller's would LOVE to have a cashflow stream earning them 4/6/9% interest, etc versus 1.5% from their bank. Or sitting there watching their retirement nest egg go down as fast as a Countrywide stock they purchased. They have a fairly well secured investment paying them monthly getting an interest rate which they negotiated.
Also, don't say to yourself, Brandon, there just aren't seller's out there willing to do this. Do not tell me that. I know better. Your're saying that to yourself because you are thinking you know that, but in reality you do not. Or maybe you do, and this is old hat to you. I don't know. All I am saying is do not make decisions for the seller as you may not know what they will accept. Do you know that adding an additional $200K from the cash sale of a home would send them to a catastrophic tax situation? Have you asked? Not normally, we just sell for cash, "because that's what is best for the seller".
Remind me in part 3 or 4 to talk about.....how this conversation should go with the seller. Hint...it's not..."i have this stupid offer some guy sent over to me....i'm sure you won't like it"....
Also, feel free to post some Q's, and I'll do the best I can to answer some of them over the next week.
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