Financial Conundrum? Market Instability?

By
Real Estate Agent with The Allen Group

Financial Conundrum?   Market Instability?

Part 1. How this is impacting our market in Oklahoma?

Part 2. Creative Financing to get your home sold or buy that next "dream home"!


This blog is for someone buying or selling a $500,000 + home just as much as for someone buying or selling a $180,000 home! (Yes, this is for people with Excellent Credit Scores, too!!!)

Election years always bring some hesitancy and slow down to our real estate market here in Oklahoma but this year has been impacted by even great concerns.  Our local Oklahoma loan and real estate market has and continues to be significantly impacted by the national real estate market and the secondary loan market...especially with government's intervention to save Fannie Mae and Freddi Market. Added to this are bankruptcies and acquisitions of major financial giants which have further destabilized our national economy.

That's great Chris, but Oklahoma is an "Oil-based Economy" and we ranked right at the top of "most recession proof" economies in the US! That is very true...and our saving grace.  Add the Thunder and fantastic local leaders bringing new business and development to our city and we've got something going that no other market has right now. 

Still, we have to aware of how the global market is impacting ours.  First and most important is the "freeze on loans".  The secondary loan market where mortgages are bought and sold has changed dramatically over the last decade and especially the last six months.  I bought my current home without a job in 2002!  This is impossible now.  Just being furloughed from Delta Airlines as a Boeing 737 pilot following 9/11, I didn't even know I could get a loan.  I was fortunate to have great credit scores and a fantastic lender, Ted Newton with Capitol Mortgage, who found creative financing to get the job done.  In today's loan market, you can not get a loan based on credit alone, you for the most part can not get a loan without putting at least 3% down, and if your creidt scores are marginal you won't be able to find financing either.

How does this impact me, Chris, since I have good credit and have cash to put down on my next home? If you don't need to sell your home first in order to buy your next home then no problem.  If you do, then you need to know what is going on with our firt time home buyers...because they push the process forward like the domino effect.  Buyer 1 buys Seller 1's $150K home; Seller 1 then is free to buy Seller 2's $300K home; which, in turn frees up Seller 2 to buy Seller 3's $600K they've been eyeing...and so on.  But if Buyer 1 can't get a loan...nobody wins!

Don't laugh but I've seen the Seller of the 3rd home in this series buy the home of Seller 1 just to push all the transactions through!!

A little brain-storming with Will Koenig with Allied Mortgage can go a long way.  Let me you give you another creative option!

<BREAK>I'll finish up later...just got a call to go show a home!! <BREAK>I'm back and had a great showing! Plus it's a day later and OU beat TCU!!! :)

Back to creative options.  There are many creative options but let me give you one that is little known.  This option is especially great for homes that are stagnant (been on the market but hasn't sold or vacant).  It's a "Lease-Purchase".

In this example,  I'll take a $200,000 home that has about $10K of negotiating room in the price (the seller will take $190K minimum for the home) and show you how it works.  There are many people right now that would like to buy a home but can't because they don't have enough for a down payment.  Or perhaps thay are going through a divorce or switched jobs and need to wait 6-12 months to buy a house.  This is very flexible and can be modified many ways.  Simply put.  Sign two contracts.  The first is for a lease for 6 months (in this scenario we set the lease for $1,500/month...basically you need to cover the expenses of your mortgage payment including the taxes and insurance).  The second contract is for the purchase of the home at the end of the lease for $200,000.  At the end of six months, the buyer has paid $9,000 in rent.  If the purchase does not go through, the seller keeps this rental income.  More than likely the purchase will go through and the seller will credit the buyer with this $9,000 as money for th buyer's down payment.  The contract was signed for $200,000.  The seller ends up receiving $191,000 for the home and having their mortgage utilities, and minor maintenance covered by the buyer for six months (no out of pocket expenses...yeah).  The buyer buys the home for $200,000 (on paper...technically the buyer is only paying $191,000 for the home) and receives a credit of 9K from the seller that the buyer can now use for their down payment. 

It may seem complicated, but it's really not.  If you are interested in knowing more about this and other creative financing options to help buy a home or get your home sold, feel free to call or email!!

Here are a few articles that you might find interesting...

More about the Lending Freeze that we are in... http://money.cnn.com/2008/09/26/markets/bondcenter/treasury_prices/index.htm?postversion=2008092614

A good article on how we got our US market into this jam in the first place...
http://money.cnn.com/2008/9/26/news/leverage.fortune/indes.htm

Congrats NORMAN, you made Money's #6 Best Place to Live in the US....
http://money.cnn.com/magazines/moneymag/bplive/2008/

All for now!!

Chris

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