Creative Thinking to Make Deals

In today’s market, clients and real estate agents must be creative.  To bring the parties together and reach mutual acceptance, the parties must think outside the box.

In the strong sellers’ market of 2005-6, financing the transactions was relatively simple:  the buyer got a loan or paid cash.  In that strong sellers’ market with low inventory and with many buyers lined up to buy, agents and clients didn’t always have to be creative to put together a sale.

That was the hay day. The 2008 market conditions put a premium on ingenuity.  Clients and agents must have a full tool box of options.  We see more and more seller’s who can’t buy unless they sell their home.  Increasingly, we see seller’s who cannot qualify for a loan in an atmosphere where credit worthiness is strictly enforced.

At all events in today’s tougher market, clients and agents must be aware of a range of tools or financing methods to get the job done.  Here are a few tools that should be in the tool box.

• Buyer must sell own home to move up. Contingent sales (buyer must sell home to make next buy).  Listing agents need protections for the Seller that is: CMA of Contingent Property to set maximum price, hefty earnest money required of contingent buyer.
• Buyer can’t qualify for institutional financing. Seller Financing (note and deed of trust).  The seller, in effect, becomes the bank or lender.  What is the scope of a credit report on Buyer?
• Buyer needs seller financing – Seller Still has Mortgage. Seller Financing with “Wrap” of Seller’s existing mortgage.  With a “Wrap” the parties will need lender approval because of  the “due on sale” clause embedded in the seller’s mortgage.  In this respect Wrap arrangements resemble – in some respects  – a short sale in that lender approval is needed to make the wrap work.
• Buyer has limited cash assumes seller’s loan obligation. Assuming the Seller’s Mortgage (VA,FHA)
• Buyer can get loan but not for full value of property and lacks down money. Carry Backs (seller helps buyer with down payment obligation).  Buyer would get a loan and the seller would “finance” or carry the down payment portion.  Seller would use a note and deed of trust and be secondary to buyer’s mortgage.
• Parties are temporarily short of closing money. Deferred Commissions (secured by note and Deeds of Trust).
• Buyer needs to build credit and buying power. Lease with option to Buy (build in advanced commission).