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How To Buy A Home When The Bank Says 'No'
| | Monday, April 24, 2006 @ 12:00 PM EDT
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Contributed by: David Leach
David Leach Properties
Read more archived articles about Credit and Finance
Part 1 – What is ‘seller financing?’
When you hear the term, ‘seller financing,’ what images come to mind?
Do you see a multi-millionaire who has so much money; he doesn’t want or need to have his buyer obtain a mortgage? He’s so well off, he can wait 30 years for you to pay him off?
Sometimes, this is true.
Do you see a seller who, because the market is a little soft, is so desperate to sell that he feels that he can only do so by offering to finance all or part of the sale?
This can also be true.
Maybe you see a seller who has a home that needs some repairs. These repairs are affecting the value of the home, so the seller can’t get what the home is really worth. By offering to finance the sale, the seller can get something closer to what the home is really worth.
This is true as well.
As you can see from the examples above, there can be a myriad of reasons as to why seller financing might be offered by someone selling a home. However, each of these reasons only shows you why the SELLER would offer to finance.
But, what about the BUYER?
In the examples above, we see why the seller would offer to finance a real estate transaction, but we don’t see what’s in it for the buyer.
The obvious reason a buyer would be interested in seller financing is to avoid getting a traditional mortgage from a broker or banker.
As the title of this report implies, the main reason for this interest is because the buyer is unable to obtain financing due to credit issues.
So, let’s turn the table here and look at it from the buyer’s perspective.
While it’s true the buyer may need seller financing in order to purchase a home, it shouldn’t mean that they have to buy a home that is either overpriced or needs major fix-up.
So, if we rule out these types of sellers, are there any options left for the buyer?
ABSOLUTELY!!
I want to introduce you to some of the most common misconceptions about seller financing, and give you some practical advice on how to use it.
Even if the seller isn’t interested in financing. I’ll share more about that a little later.
So, let’s take a look at a few of these, shall we?
MISCONCEPTION #1
Probably the most common misconception about seller financing is that it means the seller has to wait for their money.
NOT TRUE!
First of all, this based on the premise that the seller is financing most, if not all, of the purchase price. On the surface, it would be quite logical to think this would be the case.
ADVISE FOR MISCONCEPTION #1
Did you know that there are companies and individuals that buy private mortgages? It’s one of the many real estate avenues my company is involved in.
It’s called ‘discount paper’ or ‘note’ buying. You might have even seen something like this on a late night TV infomercial.
These buyers of ‘notes’ will pay cash to the seller who financed the purchase of their home. It’s a big business and many people are making good money at it.
Some of them will buy a note on a zero down purchase, while some will only purchase a note on a deal where the buyer had to put some money down. Either way, the seller can ‘finance’ the buyer and still get their money now, not later.
If you find yourself in the position of needing seller financing in order to buy a home, and your seller isn’t interested in doing so because they feel they will have to wait for their money, fill them in on this creative way to create a win-win situation you both can take advantage of.
In this lesson, we looked at the definition of seller financing. In our next lesson, we will take a look at the different types of seller financing.
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Note: David Leach is a speaker and consultant on the subject of using creative financing methods to buy and sell real estate. He is the author of the successful ebook, "Creative Financing Secrets." visit his website at www.creativefinancingsecrets.com.
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