In this article, I am going to talk about retailing houses to owner occupants. You can make more money per house by retailing and also get into more creative financing strategies by accepting a second mortgage, buying the rate down, paying closing cost, etc. Because you have more profit to work with, you can be more flexible on helping your buyer qualify.
The down side is that once you sell a house to someone there's not much chance that you can sell them another one. The good news is that you can get lots of referrals once you help someone become a homeowner.
Have you ever lowered the price of a house you have for sale as a retail property? Hopefully, after you read this, you'll never have to do that again. Did you know that for every $1,000 in price reduction it only changes the payment about $6 dollars? That's not much of an incentive for a buyer. However, if you keep the price the same and offer to pay closing costs or carry a small second mortgage, it greatly increases the number of qualified buyers that could purchase your home.
I'd like to suggest that before you ever put a home on the market to retail that you get an appraisal first. Let me also say that there are appraisers out there that can stretch the value but I don't recommend doing that. I've seen many sellers that found an appraiser to stretch the value but what good does it do when the lender is going to require either a desktop review or another drive by appraisal or full appraisal? Besides, you don't want to get a reputation with lenders of pumping up values of your homes, not to mention the possibilities of fraud becoming an issue. You don't want any part of that. You want a good appraisal by a reputable appraiser.
Once you have a good clean appraisal, you're ready to market your property and, instead of dropping the price, you offer to pay closing costs (most lenders allow up to 6% in seller concessions). This will increase the number of potential buyers that can buy your home. The realtors also like it because their commission is based on the purchase price.
Another way to increase the number of buyers that can qualify for your home is to use some of the seller concessions to buy down the rate. Builders do it all the time. You can buy the rate down for the life of the loan or just for the first few years. This makes for a lower payment and thus more buyers can qualify for your house! This one technique can save a deal.
The form we use when we are qualifying a retail buyer. There are many questions to ask the buyer. Remember, you must get them to like and trust you before you can ask too many questions. The questions on this form are very powerful. We have tried to think of every possible method a buyer could use to qualify for a loan and get the necessary down payment. I have also included a current list of all of the down payment assistance programs I'm aware of at the time of this writing. |
