by Cathy
Jackson
When it comes to buying or selling your home, the more
knowledge you have regarding how to negotiate the financing
of your purchase (or sale) the better likelihood you will
have in getting what you want. The key here is
knowledge and
flexibility.
Real estate markets are cyclical …they go up and they go
down. In a hot market you can sell your home often by just
placing a sign on the lawn. When the markets slow down then
that’s when you need to get more creative. Before we get
too far along though, you need to understand how to
negotiate a contract using cash and terms.
When I refer to
“cash”, I am, of course, referring to the
price of the home. But keep in mind this amount doesn’t
have to be in actual “cash”. You may agree to a purchase
price and have the down payment be paid in other
goods. I have looked at places where the
vendor would take a trade of something he wanted (ie. a boat,
skidoo or skiing equipment) in lieu of cash. This works
both ways of course. As a buyer, you may
offer
something in lieu of cash, or
as a seller you may accept something in lieu of cash in order to get
a quick sale.
When I refer to “terms”,
I am referring to everything else in the contract. You can
negotiate possession dates, what chattels stay with the
property and even whether the seller will help you finance
the sale.
“Seller
financing” essentially
involves the seller holding back part of the purchase price
and creating a second mortgage. I once sold a property with
a portion of the down payment to be seller- financed. This
enabled the buyer an opportunity to purchase the building
when they didn’t have the full purchase price. I now
receive money every month from this sale. The only drawback
is, of course, if the buyer defaults on payments. What
happens then is that you can now foreclose and take back
the property. If you check out the buyer to make sure they
can financially make those payments to you then it can be a
good strategy for quickly selling a property (or buying one
if you don’t have the full down payment).
So how do you know if someone is open to negotiation or
not? That depends on the reasons why someone wants to sell
their home or buy a home. If you can get some information
regarding their motivation then you will have a better idea
whether or not they will be open to negotiate on either the
price or the terms, or if you are lucky…both! You also need
to consider the market where you are buying or selling.
People are more flexible when the market is slower, but you
never know unless you ask.
One strategy to use when you are buying a home is to
make multiple offers
that you can live with
to the seller. Create each
offer differently such as one offering a higher price, but
good terms for you; one with a lower price with fewer
terms; and one with a very low price with no terms. Let the
seller pick one and you'll both be happy.
There are other creative ways to sell your home or help
your buyer finance the purchase of your home. One way is to
do a “lease-option”
or a rent-to-own
agreement. This basically
involves setting up a separate lease contract and a
purchase contract. A person would pay a non-refundable
option price for the right to purchase the property in
future...let's say a 3 year term. In addition to the lease
price, the person would also pay an additional amount
monthly which would go toward a down payment. In 3 years
when the option is due, the buyer can then arrange for
their financing using the credit they have created with you
and proof of regular payments. If they do not exercise
their option to buy the home then they lose the option
money they have paid. This strategy is excellent for
someone who has good cash flow and a regular job, but not
enough for a down payment.
What happens if you have an excellent candidate for your
home in that they have a good regular paying job, but are
self-employed and not so great a candidate for bank
financing? Then they may be a candidate for a
“wrap”
mortgage. This
involves you keeping the original mortgage, but giving the
buyer another mortgage which wraps around your mortgage,
For example your original mortgage might be for 60K at 5%.
You might sell the buyer a mortgage for 80K at 7%. The
buyer sends you the monthly payment. You pay the original
mortgage and keep the difference. This strategy would be
useful if you needed to sell the house, but didn’t need the
cash immediately. What you get is cash flow over time; not
one big cash payment. I don’t want to get too technical
here, but this strategy actually requires a different legal
document.
What you need is an “agreement of sale” which is actually
an older legal document than the regular purchase documents
used most often now. This document allows you to sell them
the “equitable
title” and keep
the “legal title”
which gives you protection.
If they default on payments to you, you can foreclose on
them and get your property back.
If you are buying or selling your home and want to make
creative cash or term offers then use our
purchase agreement on the site to easily customize your
offer. Lease-Options and Wraps are more complex
strategies and would involve using different legal
agreements which you could get from any
knowledgeable real estate
lawyer. I
bring them up here, not to give you all the details, but
to let you know there are legitimate, alternative ways
to finance the sale of your home (or purchase your
home).
Knowledge is power in any negotiation.
© Copyright Cathy Jackson 2008.
www.BuyMyMobileHome.org
