When  someone purchases a property, unless they have sufficient cash to pay the seller in full, the buyer will turn to a lending institution to borrow the funds needed to complete the transaction. In the world of real estate, this is called conventional financing. The property could be a home, condo, apartment building, office building, hotel, mobile home, land, or a business.

Given the current state of our economy, what happens when a home buyer cannot obtain conventional financing? According to an industry source, 50% of people who qualified for a conventional loan two years ago DO NOT qualify today. Does this mean that ALL these folks are not qualified buyers? No, but the current credit crunch is eliminating many stable and otherwise qualified buyers from getting the loans they need.

However, people need housing. Sellers need to sell and buyers need to buy. But a huge gap exists in the marketplace today that prevents many buyers and sellers from coming together. This "gap" is being filled by the seller taking the place of the bank.The buyer and seller agree to terms and create a promissory note. The seller has the property as security for the note, and the buyer makes payment directly to the seller.

Seller financing does not compete with conventional financing. Seller financing provides the option for buyers and sellers to complete the transactions that are needed in their lives and to play a small role in helping our economy rebound.

At a recent conference of note professionals from across the United States, this issue was front and center. Let me share a statistic:
In 2006, 1 of 400 real estate transactions involved seller financing.
In 2008, 1 in 50 real estate transactions will involve seller financing.

This startling contrast tells you all you need to know about the state of real estate financing in the current marketplace.

Many sellers may be reluctant to offer seller financing because they want to sell their property and cash out. To these sellers, collecting monthly payments means they are a landlord. Most people have no interest in being landlords - they want cash. To them, Cash is King. However, a little education will get that seller to realize that the note he creates is marketable, and that note buyers throughout the country may be interested in buying that note. California NoteBuyer has relationships with many of those buyers.

When a seller can sell and a buyer can buy - without conventional financing - the void is filled. Thus, one more home in America will be filled with a family as a result.

HAPPY HOLIDAYS!


Denny Stanz