When a property is not selling, most real estate agents are quick to suggest a reduction in the sales price. It is common to see the tag line “Price Reduced” added to For Sale signs, listings and ads.
Rather than just reducing price…
consider offering owner financing to sell a property quickly!
In today’s real estate market, obtaining a mortgage can be a large stumbling block to home ownership. According to the Mortgage Bankers Association, 30+% fewer borrowers are able to qualify for a loan today than one year ago. Underwriting has tightened significantly and only those with a stellar credit rating and a significant down payment are able to obtain bank financing. By offering owner financing, a seller can reduce marketing time and maximize price while providing the buyer an economical alternative to bank loans.
The buyer makes a down payment and the seller accepts payments over time from the buyer. In essence the seller becomes the bank and is able to collect interest on the balance financed at the agreed upon rate.
Rather than collect payments for 20 to 30 years, most sellers will prefer a balloon payment provision that requires the buyer to refinance and payoff the seller in 7-10 years. The seller also has the option of selling all or part of the payments to a note investor for cash now.
Back in the 1980’s the use of owner financing increased when interest rates were in the teens and borrowers had trouble qualifying based on the high monthly payments. Seller financing is now offering a similar solution to the financing challenges caused by strict underwriting requirements.
Offering owner financing can be a very effective way to reduce marketing times, provided a property is priced at fair market value using comparable sales. Simply add the words “Owner Will Finance” to the advertising and watch the inquiries increase.