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 state of our current 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 getting 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 a first trust deed as security for the note, and the buyer makes payments directly to the seller.
Seller financing does not compete with conventional financing. Rather, 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. In 2006, 1 of every 400 real estate transactions involved seller financing. In 2008, 1 in 50 transactions involved seller financing. This startling contrast tells you all you need to know about the current state of real estate financing.
Many sellers may be reluctant to offer seller financing because they want cash. To these sellers,collecting monthly payments means they are a landlord. Most people have no interest in being a landlord - 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. I have relationships with many of those buyers and can help put buyer and seller together.
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 happy family.
HAPPY HOLIDAYS
Denny Stanz
California NoteBuyer LLC
PO Box 196
Helendale, CA 92342
760-245-5366
760-245-5367 fax
[email protected]
www.CaliforniaNoteBuyerLLC.com
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