How To Sell Your Home When Nobody Wants To Buy It
Posted: Monday, February 01, 2010
by Rhiannon Wilkinson
I spend all of my time finding creative ways to sell houses, so I am going to give you a list of SEVERAL suggestions. However I must warn you that these are "Plan B" solutions. I know the ideal is to get a cash or pre-qualified buyer so you can move on with your life. But the truth of the matter is, your house is in competition with a sea of other homes, as well as bank foreclosures.
Option #1: Short Sale
A short sale is when a cash investor comes in to negotiate a payoff with your lender. If you do not have any equity in your property and it is getting tough for you to keep up with your payments, an investor will handle the legwork of speaking to the bank, doing all of the paperwork, and negotiating a lower amount than what is owed for a quick sale. However, you have to qualify for a short sale. The bank has to see that you are in a distressed situation, and will usually ask for a hardship letter as well as income statements and a break down of your expenses. Your credit will be salvaged, but that is about it.
The drawback to doing a short sale is if you have any equity in the property, you may as well kiss it goodbye. Any proceeds would go directly to the bank.
Option # 2: Owner Financing
In this marketplace, Realtors don't sell houses - financing does. The banks are turning away potential home buyers in DROVES on a daily basis. A lot of these home buyers have 10% to 30% to put down, but just do not have the established credit needed to buy a house. Realtors will tell you that it is impossible or even "illegal" to do owner financing on your home if you already have a mortgage on it. But that is simply not true. What this strategy is called is a "wrap around mortgage" or a second mortgage. Basically, you would finance the buyer, and wrap your note around your existing mortgage.
After 12 months, a private note buyer will cash you out of the note completely if the buyer makes their payments on time. The technical term for this type of investor is called "Note Buyer" And they usually give you up to 80% of the notes face value. But they love buying mortgages if the buyer makes their payments on time over the course of 1 year.
The drawback to doing owner financing is that you will have to foreclose on your buyer. The cost of foreclosure will range from $2,000 dollars to $4,000 dollars (shop it in your area) And it usually takes about six months to 12 months to get them out of the property. However, I've found that if you offer the buyer a little bit of money to get out of the house and agree to not put a foreclosure on their credit report, they will leave without damaging the property. When I say a little bit of money, I mean enough to move them out of the house so they can get a different place. That is why it is suggested you take a SUBSTANCIAL down payment, so you can offset that risk.
If they agree, then you can just turn around and owner finance it again for another big down payment. All you do is put owner financing on Craiglist, and your phone will start to RING off the hook. There are not enough owner finance deals out here to cover the demand. What's also cool about owner financing is that you can ask for top market value and up to a 10% interest rate for carrying the note. And that is simply because YOU are the only bank in town who is willing to finance a property!
Option # 3:
Lease Purchase.
Lease purchase is a little less risky than owner finance, and puts you more in control of the property. Basically, you place a tenant in the property and give them an option to purchase it for full retail value later down the line. They usually put up about 5% of the purchase price to show good faith money.
But if the tenant stops paying, then it is an eviction and not a foreclosure. Depending on your state, evictions are around $250 to $500 dollars, and you can evict a tenant in as little as 30 to 90 days. (Check your local laws) This way, you get a little bit of upfront money plus get your mortgage taken care of.
The drawback to lease purchase is only 25% of these tenants end up buying the home. It is the hazard of the "try it before you buy it" senario. But you can encourage them by referring them to credit repair specialists and making sure they speak to a lender before you agree to enter into a lease purchase agreement.
With both the owner finance and lease purchase strategy, the buyer takes care of all the house maintenance and repairs.
Option # 4: Rent the property until the economy improves
If you don't feel comfortable offering financing, even with a substancial amount of money down - maybe the best bet would be for you to rent the property until the market climate changes. I know the news is predicting doom and gloom for the real estate market - but here is the bottom line. Everybody has got to have a place to live! So, all of those people who have recently had a foreclosure are now looking for apartments and rental houses. You will get your mortgage payment covered in the process so you can move on with your life.
The drawback of renting is that you are responsible for repairs and a tenant will not treat your property with as much respect as a lease purchase or owner finance buyer would, because their mentality is "here today, gone tomorrow."
Option # 5 Trade your home with another home owner
If you are moving to a different area, check local listings to see if there is an owner who might be willing to do an equal trade with you. Who knows, you may run across somebody who loves your house and you love theirs - and it could be the perfect trade off without any headaches or hassles.
The drawback is that this is VERY rare to find!
If you want to research these topics any further, don't be afraid to find the local real estate investors association in your area. Those guys (and girls) will give you tips, tricks and advice about their experience with each one of these strategies.
I wish I could tell you something like spray Febreeze on your pillows, and the house will surely sell. But during this market climate, you have got to be willing to think outside of the box!
Also, let me know if I can help you with anything!
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