Financing Strategies for
Home Sellers
by Gerri Detweiler for Credit.com
If your neighborhood is anything like mine, the red-hot real estate market
of last year is starting to cool off. Homes that would have sold in hours
a year ago are now sitting on the market much longer. If you are selling,
you will want to consider ways to make your home more attractive financially.
For most buyers, financing is
a crucial part of their decision regarding which home to buy. The fact is
most buyers can’t afford to pay cash for a home, so a key issue will
be whether they can afford your home and the payments that buying it will
require. That question is even more relevant in today’s environment
of higher home prices and rising interest rates. Here are some points to consider:
Offer Owner Financing: If you have a lot of equity in your
home, you may be able to offer to “hold financing” in the form
of a second mortgage for your
buyer. That means the buyer will get a mortgage from a traditional lender
for, say 80% of the purchase price, and you will set up a payment plan with
them for the remaining 20%. By collecting the full price of your home plus
interest as the loan is repaid, you can actually end up with even more money
from your sale.
Sounds easy, but there are caveats. “Secret seconds” that are
kept off the records are a form of mortgage fraud, and I don’t recommend
you consider any side financing deals that are not above board. The lender
that will be financing the first mortgage for
your buyer must approve the deal, so run your financing proposal by a mortgage
professional first to make sure it is acceptable. Then use a real estate attorney
or a service such as Circle Lending to properly set up your loan and ensure
it is recorded in the public records.
Spell It Out: Ever notice how loans for everything from cars
to jewelry focus on “low monthly payments?” Prospective homebuyers
may not have taken the time to investigate financing before they started shopping,
and may have no clue the payment options available for a home in your price
range. A mortgage broker or loan officer will likely be more than happy to
create a financing sheet that details payment options for various types of
loans; after all, it gives them the chance to get in front of prospective
customers.
Help Out: If coming up with cash at closing will be a problem
for your buyer, you may be able to help by contributing toward the closing
costs and/or participating in a down payment grant program such as the Nehemiah
program (http://www.nehemiahcorp.org/),
Neighborhood Gold (www.neighborhoodgold.com)
or AmeriDream (www.AmeriDream.org).
Consult with a mortgage professional to find out what types of closing costs
you can help pay, and how much you can contribute. Some lenders, for example,
will limit contributions from the seller to 3% or 6% of the sales price, depending
on the amount of the down payment.
Lower Their Payments: You may be able to offer to pay discount
points for your buyer. Points lower the interest rate the borrower pays, and
can make their payments more affordable. Again, run it by a mortgage professional
first.
Make It Easy: For $300 -- $500, you can offer to pay for
a home warranty, which will help ease your buyer’s worries about costly
home repairs the first year. Your real estate or mortgage professional can
give you information on companies that offer home warranties in your area.
Since you don’t have to pay for the policy until your home sells, it
should be a no-brainer.
Don’t Waste Time: Ask your buyers to get pre-approved
for financing before accepting their contract. This helps you avoid wasting
time tying up your home with borrowers who can’t qualify for a loan.
Buy Upgrades: You may be able to include an allowance for
upgrades or repairs in your deal. You may also offer to pay homeowner or condominium
dues, or a special assessment for a certain period of time.
And a final warning: Do not list your home for sale if you
think you might want to refinance it if it doesn’t sell. Most lenders
frown on refinancing homes that have been recently listed.
Gerri Detweiler is credit expert for Credit.com and a licensed
mortgage broker in Florida. She is also the author of three books, including The
Ultimate Credit Handbook.
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