A recent headline in the Business Section of the LA Times read Mortgage Troubles do a Flip-Flop. The article quoted the California Association of Realtors, and said, in part, that nearly half of all Californians can now afford the median-priced home in the state – but can’t get a mortgage loan!
This is a reversal from 2006, when just 12% of households could afford the median priced home, but seemingly anyone could get a mortgage to buy one. One of the cruel facts from the housing crash is that many folks who suffered tremendous home value loss or other economic pain may now miss out on record low prices and interest rates if they want to buy again. The old adage ” You don’t need a loan if you can qualify for one” seems to apply these days.
Lenders claim they are cautious because of uncertainty over a tougher new regulatory environment, and persistent demands from government sponsored mortgage buyers to buy back soured loans.
So, this void has been created. Cash buyers and cash investors have rushed in to buy at the record low prices available. Some of these purchases are in bulk. You and I can’t compete.
But, a well structured seller carryback sale will fill the void as well, and can be done by one well intentioned seller after another. If you are a seller with no mortgage or little owed on your home, and you don’t need to cash out today, you may want to consider offering a seller carryback to a buyer who finds himself being squeezed by these difficult market conditions. Ask for his credit report, get a healthy downpayment, amortize the note over the fewest years possible, and since you are facilitating the sale that would not otherwise happen, use a minimum 7% interest rate. Have a Title company service the payments for you so you don’t have to worry about it. You can now enjoy the payments if you have chosen your buyer carefully. Should you later decide you want to cash out, the equity in the property will be a big plus to any note buyer, and you should be able to sell your note at a price that minimizes the discount and satisfies your needs.
Don’t be afraid of a seller carryback if you have never done one. Just be smart. Find a good buyer, structure the sale to suit you and your buyer. Get guidance from your broker. Call or write me for my ideas. Play your role in helping this market get back to normal.
