FINANCING AND TERMS
Unless paying cash, most buyers go through the traditional
methods of getting financing from a lending institution,
and have some money either saved or made from the sale
of a prior home to use as a down payment. Once a buyer
has made an offer that the seller has accepted, the buyer
typically needs to get a loan for the agreed upon price
of the property.
An important item that a seller and/or their Agent should
try to determine is whether the buyer has been pre-qualified
for the price of the property they are considering. It's
not uncommon for buyers to look at properties out of their
price range. This can waste everyone's time, and possibly
even influence the likelihood of other offers being made
by other prospective buyers. Although a buyer is typically
obliged to furnish the seller with some form of “conditional
loan approval” early in the contractual process,
sometimes an early determination of affordability (actually
an implied responsibility of the buyer's agent) can help
avoid lost time and marketing opportunity. In any case,
a buyer's ability to qualify for financing the purchase
is critical to the seller's interests.
There are alternative methods to homeowners who are anxious
to sell, who are not in need of all of the proceeds from
the sale, and who are willing to consider seller financing.
This type of financing can be done by taking on a second
mortgage, or even by financing the entire purchase if
the seller owns the house free and clear.
Seller financing differs from traditional loans in that
the seller does not give the buyer cash to complete the
purchase. In essence, the seller becomes the lending institution
for the buyer. This loan involves extending credit against
the purchase price of the property while the buyer executes
a promissory note and trust deed in the seller's favor.
As in loans from lending institutions, a deed to the property
is created, but in seller financing, the seller holds
the deed, until the buyer has made the last payment.
When the terms are worked out between buyer and the seller,
the title or escrow company prepares the necessary paper
work. As part of this process, it's important that the
seller check the buyer's credit rating. The seller needs
to be confident that the buyer is able to make the required
payments in a timely manner.
Why consider seller financing? There are many reasons,
and a variety of pros & cons for both buyers and sellers,
but a few of the greatest benefits to the seller are:
(a) it opens the doors to a much broader pool of prospective
buyers, (b) it greatly increases the likelihood that a
sale will result quickly, (c) it's highly likely that
a sale will be at or very near the listing price, (d)
in the event of default, the seller can reclaim the property,
retain all monies paid by the buyer, and sell the property
again, and (e) over the term of the note, the principal
& interest earned can yield net proceeds greater than
would have been realized with a “straight sale”.
Sometimes, getting “creative” with financing
can make all the difference in encouraging offers, qualifying
buyers, closing smoothly & quickly, and yielding the
best possible results for the seller. Your Global Realty Brokers Real Estate professional can be instrumental
in assisting with financing issues, as part of the listing
process, and as prospective buyers materialize. Finding
ways to make your property affordable for that marginal
buyer who “really wants it” can make or break
a deal, and ultimately provide the best result for the
seller, sooner rather then later.
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