Posted by: Roby Robertson | September 4, 2008

Lake Norman Real Estate, Learn About Seller Financing

The Lake Norman Seller Financing Solution

If you are a Lake Norman or Charlotte Area home Seller, Seller financing can be a great way to get a house sold without slashing the price. By recognizing the millions of people who can’t get traditional financing as potential buyers, resourceful property sellers (and their real estate agents) can minimize their time investment in getting a property sold. Even better, sellers who offer financing can usually get a higher asking price for their property, even in the slowest markets.

Most Lake Norman and Charlotte area home sellers would never consider offering financing to the buyer directly because they are not aware of the benefits and/or don’t fully understand how creating a note works. Let’s evaluate the advantages!

There are three advantages to Seller Financing :

1. MORE BUYERS. Seller financing is very powerful when the market is slow or when there are many similar houses on the market. Listing the house as ‘offering seller financing’ will make the house stand out and attract more buyers.  In this tight lending market many individuals cannot get funding from a bank. Offering financing will open the doors to these prospective customers as well, essentially significantly increasing the pool of potential buyers.

2. MORE MONEY. Seller financing also brings the property seller another advantage.  Offering to carry back a note will bring a unique demographic of buyers who are willing to pay more for a given property than the general population.

3: LONG TERM PROFIT. When the seller finances the buyer, they get to act as “the bank”. That means they could structure the deal to collect interest. Over time, if the seller holds on to their note, this can add up to tens of thousands of dollars in additional income.

The Strategy

Even when these benefits to “carryback” lending are made clear, many Lake Norman and Charlotte area sellers are still hesitant to offer financing because they are entering unfamiliar territory. It’s a natural, human response to be uncomfortable with new things and things you do not understand.

For many property sellers, considering owner financing when they’ve only dealt with buyers via traditional funding is definitely “new and unfamiliar”. But once sellers understand the process, they are likely to choose seller financing instead of the unattractive option of cutting the listed price or waiting indefinitely for the a buyer.

A seller-financed real estate sale is simply a real estate transaction where the seller acts as “the lending institution”. The seller sets the price, determines and accepts a down payment, and then finances the remaining balance. The final step is the part that may scare some sellers, but in actuality, it can be very simple.

For example, If the sales price is $100,000.00, and the buyer gives the seller $10,000.00 cash (the agent.s fee will be deducted from this down payment), the seller will finance the balance of $90,000.00. The buyer and seller would then agree to the terms, such as the interest rate and the total term, and use an attorney to create the mortgage document and close the deal. From that point on, the buyer sends the seller monthly payments for the house he/she has just purchased.

Special Circumstances

The whole process can really be that simple. But, there are some substantial differences between a seller-financed deal and one that relies on traditional bank funding.

First of all, the seller in this example does not receive a large, one-time payment at the time of the sale. In fact, they will only receive the down payment, and in some situations, most of that will go towards paying the real estate agent’s fee. On the other hand, the seller will be receiving monthly payments at a decent interest rate, but this income stream can’t be used as a down payment for a new house.

Since many home sellers are also looking to buy another property, the seller will need to get enough at closing to pay their own down payment. Without this payment, the seller’s hands will be tied when they look to purchase another house and need to have a substantial amount of funds available. There is a common solution to this issue, however.

The Solution

In order to get the money the seller needs from the loan they just created, the seller could sell the monthly note payments to a specialist buyer for a lump sum of cash. If the seller finds someone willing to buy the payments, now they can “have their cake and eat it too”.

In summary.

Step one: Use the seller finance option to find unique customers willing to buy the house at a higher price than would have been possible otherwise and complete the real estate transaction quickly.

Step two: Decide on the terms of the deal and create the note.

Step three: If the property seller needs immediate cash to buy another house or for any other reason, their new incoming payment stream can be resold. The person who buys the future payments from the seller will provide the funding to act as a down payment on a new house, and every party involved in the deal comes out smiling.

Information courtesy of Bassett, Bassett and Associates Investors

For additional information or assistance, contact your Lake Norman Agent at 704 451 7051 or by email.

See also:

Be The First To See Lake Norman Hot New Listings as soon as they become available.

Lake Norman For Sale by Owners, Please Read

What would my Lake Norman Home Sell For?

Why Lake Norman and is such a great destination.

Creative ways to sell your Lake Norman Home

A letter to Lake Norman Home Sellers

Lake Norman Sellers, Before you drop that price

Another Opinion on Seller Concessions

Roby Robertson

 

Saving My Clients Thousands

Broker/Owner

 

Real Living In Style
Davidson NC

 

roby.robertson@realliving.com

 

Ph: 704 451 7051
Fax: 704 892 9766

Committed to Saving My Clients Thousands When Buying and Selling Real Estate

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