Future Selling Will Require Increased Knowledge of Financial Tools
Four and one-half years after we entered this downturn, many real estate professionals still attempt to close transactions through the sole use of traditional forms of financing. By traditional, I am referring to “30-year fixed”, “ARMs” and “Balloon” mortgages. Yet these financial tools can hardly be seen as applicable to some marketing methods which are becoming more and more prevalent as each year passes.
Real estate auctions provide a good example of this. Many auctions protect Realtor involvement and are therefore an additional revenue opportunity for Realtors. However, a large number of properties being auctioned require special financing that allows for properties being purchased to be rehabbed in some fashion. Auction companies have only one interest: to get the property sold. So often the clauses “financing not available” and “proof of funds required” will be noted on specific properties. This means that the buyer needs to demonstrate that cash is readily available for purchase and that no allowance is being made for conventional mortgage processing. For this reason, many people who purchase property at auction have investor financing that allows not only for the purchase of the property but also provides funding for needed home improvements. Often times, there is even a moratorium on payments permitted for several months, to allow for completion of repairs before payments begin.
So many examples of special financing exist that it almost staggers the mind. Below is just a quick and very limited sampling of the many choices that homeowners and investors have in selecting financing type for their properties. Each has it’s own unique purpose and audience, but rest assured there are tools available for all type of buyers and sellers.
For Homeowners
Fannie Mae 97 – 3% down (or less), up to 38% qualifying ratio
Fannie Mae 2-4 unit program – Owner occupied up to 4 units, portion of rent used to qualify the buyer, dedicated to rural areas (under 50K residents)
203K – No PMI, moratorium on payments for 6 months to allow for repairs to be completed
Seller financing – Points, pre-payment penalty, term and interest rate are all negotiable
For Investors
Hope 3 Program – For purchase and refurbishing
Title One – For home improvement, no appraisal required, no equity needed, takes second or third position, no pre-payment penalty, flat rate for up to 20 years
Portable mortgages – Variable term, reusable loan
Wrap-around mortgage – Can facilitate a purchase while leaving existing loans in place
Seller financing – Allows sellers to take payments over time, creating residual-type earnings
The possibilities and interplay between the types of financing available are too numerous to discuss in the context of a blog. Some investors that I have spoken with and read about have identified as many as 200 different ways to finance a real estate transaction, yet many real estate salespeople can name only three!
It is time to act! Some steps that can be taken include:
Pursue training in the area of creative finance
Take a course in real estate investing
Take a situational approach to financing. Look for creative ways to faciliate each sale and present them
Ask every seller if they are in a position to consider owner financing and explain how it works
Future Selling Will Require Increased Knowledge of Financial Tools
Four and one-half years after we entered this downturn, many real estate professionals still attempt to close transactions through the sole use of traditional forms of financing. By traditional, I am referring to “30-year fixed”, “ARMs” and “Balloon” mortgages. Yet these financial tools can hardly be seen as applicable to some marketing methods which are becoming more and more prevalent as each year passes.
Real estate auctions provide a good example of this. Many auctions protect Realtor involvement and are therefore an additional revenue opportunity for Realtors. However, a large number of properties being auctioned require special financing that allows for properties being purchased to be rehabbed in some fashion. Auction companies have only one interest: to get the property sold. So often the clauses “financing not available” and “proof of funds required” will be noted on specific properties. This means that the buyer needs to demonstrate that cash is readily available for purchase and that no allowance is being made for conventional mortgage processing. For this reason, many people who purchase property at auction have investor financing that allows not only for the purchase of the property but also provides funding for needed home improvements. Often times, there is even a moratorium on payments permitted for several months, to allow for completion of repairs before payments begin.
So many examples of special financing exist that it almost staggers the mind. Below is just a quick and very limited sampling of the many choices that homeowners and investors have in selecting financing type for their properties. Each has it’s own unique purpose and audience, but rest assured there are tools available for all type of buyers and sellers.
For Homeowners
For Investors
The possibilities and interplay between the types of financing available are too numerous to discuss in the context of a blog. Some investors that I have spoken with and read about have identified as many as 200 different ways to finance a real estate transaction, yet many real estate salespeople can name only three!
It is time to act! Some steps that can be taken include:
Related Posts
BHGRE® Brokerages Recognized in the 2024 RealTrends 500
The Better Homes and Gardens® Real Estate network extends its sincere congratulations to the affiliated
How to Sell a High-End Home During Any Market
Considering the value of high-end homes, it’s understandable that luxury homeowners and agents would be
Winter Home Safety Tips to Share with Your Clients
As winter descends on cities and small towns across the country, many people find themselves
10 Ways to Wow Your Real Estate Clients
Good customer service is imperative for real estate agents, but being polite and knowledgeable about
Sellers Reluctant to Sell? Here’s What May Change Their Minds
Current social and economic conditions have put the breaks on many homeowners’ plans to sell.
BHG.com Network Highlights 2023
Better Homes and Gardens magazine features the expert insight of our affiliated agents and brokers in