Outside the Box Home Selling
Because of the credit crisis we are losing many would be buyers (wbb) of real estate. Many have lost their jobs. Many others can no longer qualify for a mortgage for a number of reasons; the guidelines have become stricter, wbb have not been able to pay their current mortgage on time so they have a credit blemish, wbb cannot sell their current residence to buy up or buy down ....There are a number of reasons why the number of wbb is shrinking. The days of planting a "FOR SALE" sign in the dirt in front of your home and watching buyers swarm all over your home are gone... for now. The supply of homes on the market has increased substantially and the demand from buyers has decreased substantially resulting in much lower home prices. In a tough market, it is survival of the creative and those who explore the options.
One option is to become paralyzed; leave your home on the market and watch home prices continue to slip. This is a slow death. Another option is to resign yourself to the fact that now is not a good time to sell and you take your home off the market and wait a few years when the market recovers and it will, guaranteed. But for those of you who for some reason cannot wait it out and must sell your home then you better think outside the box and get creative. You can no longer wait for the ideal buyer with good credit to come along, get his mortgage and pay you all your money in one lump sum. Now that used to be the traditional neat box with no strings attached but it is now only a dream in today's market.
Let's be proactive for those who must sell and let's think outside the box for more options. These options are not as neatly boxed as we have become accustomed to and some have strings attached. One option is to rent your home for up to three years( maximum for tax reasons if you have a gain) even though you may have negative cash flow. At least you will have some return on your investment to help service your debt and carry you through these tough times. This is attractive if your home is currently vacant. A second option is to sell your home under a contract for deed (you remain the owner of the property until you are paid in full) where the buyer pays you a lump sum down and monthly payments over time and in a few years when the buyer can qualify for a mortgage he pays the balance due you and the buyer receives the deed to your home. This could be a valuable option where the buyer has a substantial down payment but cannot currently qualify for a loan. A third option is to do an exchange whereby you trade the equity in your home for the equity in a larger (or smaller) home and both buyer and seller qualify for a mortgage and pay the difference in value between the two homes. This could be an attractive option when a home owner wants to sell and buy another home but needs to sell his home first. A fourth option is to enter into a lease purchase agreement where you lease your home to a wbb and you agree on a sales price and agree to close at a future date. The buyer must purchase at the agreed price. This might be a valuable option for a wbb who does not have a substantial down payment currently but may expect one in the future which would enable him to qualify for a mortgage and close. A fifth option is to enter into a lease option agreement whereby the wbb signs a lease with an option to buy your home at a future date for an agreed price. The wbb usually pays you more monthly rent (or a lump sum) then you would otherwise be entitled to because he has to pay for the option to purchase. But this option has one long string attached to it, because the wbb does not have to exercise the option and buy your home. This is the least attractive option for a home seller unless the rent is much higher than market rent.
I am sure there are other creative options available if you think outside the box. There is no end to the ingenuity of the American people in difficult times. We will not only survive but we will once again thrive and be smarter and more determined than ever before. For now let's get over this road bump and learn from it.
Dominic J. Mancini
133 Fuller Road
Hinsdale, Illinois 60521
(630) 325-2580 fax (630) 325-5169