Searching for a home can be draining in "normal" times. When inventory is high and home mortgages are more difficult to obtain, the process of finding a property and securing financing can be downright exhausting.
"Creating financing" is one of the items that is "in" for 2009, according to an annual survey conducted by Mark Nash, a Coldwell Banker broker and real estate author who uses a network of 839 Realtors in all 50 states and eight Canadian provinces to acquire consumer responses to a variety of housing questions.
Nash, whose book "1001 Tips for Buying & Selling a Home" is a helpful guide for consumers considering the residential market, believes that seller financing, or "carrying the paper," will return to popularity this year along with the lease-option. The lease-option allows a potential buyer to lease the property and have some, or all, of the lease money applied to the purchase price if the potential buyer exercised the option to purchase.
In a conventional lease with option to buy, the seller charges the buyer a nonrefundable fee for the option to purchase the property at some agreed-upon point in time. The amount can vary depending on how eager the seller is to sell and the size and quality of the house. Typically, the higher the fee, the better the buyer maintains the property.
Because the lessee has made no down payment, the monthly rental fee is typically higher than prevailing market rates. The two parties agree on what portion of the rent will be applied to the down payment. Any amount can be credited.
The seller doesn’t have to pay tax on the option fee until the option is exercised or the option period expires. If the option is exercised, the fee is considered part of the down payment.
It’s often difficult to locate a seller willing to accept a lease-option unless the seller is eager to move. There will be many eager sellers in 2009.
Not all buyers are eager to seek bank financing, and an increasing number are finding they are unable to qualify under new stringent loan guidelines. Buyers would rather avoid loan costs and the possibility of a deal going south at the last minute. In return, they often offer the seller a slightly higher price.
Most of the time, seller financing works well for both sides, but both sides — especially the seller — should be prepared to handle the deal much like a small business. While the buyer can simply mail a check every month, it’s up the seller to craft the ground rules.
If you participate in any sort of seller financing, make sure to build in safety features that protect your investment and sanity. In fact, it’s not a bad idea to copy many of the loan requirements a local bank would insist upon.
Here are some other interesting topics on Nash’s "in" list for 2009:
- Home uplifts. Not a big renovation, but some new finishes that can visually help. Not a gut rehab to the studs, but new flooring, countertops and appliances.
- Real estate agents as a housing resource, not a salesperson. Skilled agents who help consumers determine if they should buy or sell a home. Homeownership is not for everyone. Factors such as a job move in less than three years, marginal credit and lack of interest in home maintenance can be reasons for a resource-driven agent to advise their client not to buy.
- Property tax appeals. With home prices dropping, many savvy homeowners are appealing their property taxes. This is especially attractive to those looking to sell their home in 2009. With a competitive marketplace, those with the most realistic taxes are more likely to offer buyers an overall lower expense in homeownership.
- Loveseats. A pair or trio is gaining acceptance as the functional way to rearrange a living or family room. People are tired of sitting miles away from others on oversized sectional sofas.
- Obama-era paint colors. Look for parchment whites, cashmere yellows, bright optimistic blues and radiant golds in the White House.
Here’s a sampling that made the 2009 "out" list:
- Fixer-upper homes. With larger down payments required by mortgage lenders and consumer credit cards maxed out, homebuyers want a home in move-in condition.
- Real estate agents that started career in the boom. It was easy for any new real estate agent to have instant clients during the boom years. After all, they thought the business was about order (contracts) taking. Now they’ve realized they didn’t build a long-term client base during the boom or acquire knowledge about servicing a client’s needs in a not-so-easy market.
- Home staging. This is a recently overused, low-cost marketing strategy for vacant or occupied homes with longer-than-normal market times. Buyers have said "enough" of the nonprofessional usage of assorted leftover props placed around a for-sale home to make it supposedly homey. Buyers are saying "market it as it is and clear out the tired silk flowers and stale potpourri."
What made your "in" or "out" list? What about a simple rant or rave? We promise to print the most provocative.
To get even more valuable advice from Tom, visit his Second Home Center.
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