In the world of finance, they say that when one door closes, another opens. One man’s loss is another man’s gain. If you are an underwater homeowner, this might come as little consolation. Seen from another perspective, though, there are almost always ways to take advantage of prevailing tides with a little bit of forethought and planning. Trying to sell your home by yourself, usually referred to FSBO or For Sale by Owner can be difficult or simply impossible. However, by enrolling the help of a creative Real Estate professional, you might find similar alternatives that can work. Alternatives strategies like owner financing and leasing to own are becoming more common now that traditional lenders have frozen up. The fact that we are firmly entrenched in a buyer’s market just means that we have to do a little research and reorient ourselves to the options.
Assessing the Damage
As soon as it becomes clear to a homeowner that the situation is getting worse, fast action will be in their best interest. It is all too easy to let hopelessness take over, but there are better ways. Doing nothing is likely to lead to foreclosure or bankruptcy. This means that you walk away with no house, no money, and a ruined credit score; starting over again is going to be difficult. It is much better to calmly and clearly look at the facts and assess the scene. There are probably options available to you that you don’t know about.
The first step is to take a clear and cold-eyed look at your finances and make a decision. Ask yourself if you will be able to weather the storm and keep making mortgage payments for the foreseeable future. If so, is it worth it, or would you rather get out and look for a better situation? If you are already late on your payments, or if your house has negative equity, it is time to think about cutting your loses. Remember: even selling your house at little or no profit is better than sinking deeper into debt. Wherever you are on the spectrum there are options. It might not be the funnest weekend you ever had, but sitting down to do the research will benefit you in the long run. The important thing is to take action.
Some of the Alternative Lending Options
As long as your property does not yet have negative equity, a for sale by owner arrangement may make sense. In this scenario, a seller avoids the realtor fees associated with a regular listing. This will bring down the asking price and prove appealing to buyers. If your house isn’t likely to sell through regular channels, this can be a great way to broaden buyer interest. There are lots of ways that both parties can maneuver to create a mutually beneficial arrangement.
However, FSBO sales will not be possible if the house already has an upside down mortgage. That just means that you owe more than the current value of the house. In this case, sellers might want to consider owner financing. Now the buyer makes payments to you instead of to the bank. While the seller retains default liability in this kind of exchange, they also retain ultimate ownership until the payment is complete and can effect foreclosure if there is a problem. While they won’t collect a lump sum, the owner will collect interest on the loan just like the bank would otherwise.
Owner financing will attract a different kind of buyer, which may be appealing if regular buyers are scarce. These investors are looking for deals, and you may be able to interest them by offering appealing terms. Self financing can provide you with wiggle-room so that you can present a good deal without necessarily losing your shirt. An example of this would be offering your property to an investor at a low asking price with the understanding that you will recoup your loses through interest payments made over the life of the loan. While this is not an immediate fix, it can allow you to turn the tide and at least stop the ship from sinking.
Leasing to buy is another useful alternative lending option. Just like it sounds, this arrangement allows interested parties to rent with the option to buy at a later date. This can be a great way to keep on making the payments until a sale can be finalized or some other arrangement can be made. While a seller won’t receive a lump sum through leasing, it is a way to make a sale more attractive if nothing else is working.
These options can be modified in many ways to appeal to different kinds of buyers and to fit your particular situation. Understanding that we are in a buyer’s market can help you get perspective on the marketplace and discover new ways to attract buyers and get the best possible deal. The most important thing is to keep moving forward. Start where you are and take steps to fix the problem. This may require looking to real estate investors in lieu of regular buyers or FSBO options instead of banks. Nothing is impossible, with a little patience and determination, your problem, too, has a solution.