Why Does a Seller Carry Back Happen?
Last week, those of us who are focused on the world of seller financing, held our annual meeting in Las Vegas. It's a small group, all of us pretty much know each other.
As usual, I walked away with a few things that will help me in my business. One of them
I want to share with you in this Newsletter. It's so basic, and yet it struck a chord with me because this is the guts of this business - why do sellers offer seller financing? Why do buyers ask for seller financing? Here is why:
Sellers
1. More Buyers - a seller who is willing to offer seller financing increases the buyer pool for his property. The more buyers he has to choose from, the higher the odds he will find the right buyer.
2. Income Stream - some sellers don't want or need cash. They prefer an income stream to supplement retirement or other income. 3. Non-Conforming Property - if a seller owns a 30 or 40 year old mobile home, a buyer will have difficulty obtaining financing for the property. Offering seller financing solves this issue.
Buyers
1. Foreclosure/Bankruptcy - if a buyer has either on his record in the last few years, bank financing will be difficult, if not impossible. He may be a good risk otherwise, and ask the seller to consider him with strong terms that protect both of them.
2. Self Employed - many otherwise qualified folks who do not have a strong Schedule C will not get bank financing. They are ripe for seller financing.
3. Divorce - many folks have been ravaged financially by a divorce, but a strong job and a lessening of emotional turmoil can make this buyer a great prospect.
4. Tight Credit - we all know this one. Lots of buyers out there with a little glitch on their record, but still strong risks.
5. Unstable Jobs - some folks are in occupations/industries that are seasonal, or have swings in activity(construction?). Yet, these buyers may conduct their financial lives to account for this. Good risk possibility here.
There are many more, of course. But whether you are seller or buyer, be aware that the housing market always needs both of you to help out.
Definition of Foreclosure - A property going back to its rightful owner...Tom Henderson.
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A New Housing Bubble?
Amazing to me the different outlooks you can read about when it comes to the housing market.
Interesting one last month from Edward J. Pinto and Stephen D. Oliner, co-directors of the International Center on Housing Risk at the American Enterprise Institute. The first paragraph begins: "Even though the recent financial crisis is barely in the rearview mirror, risk is starting to build once again in both the U.S. mortgage and housing markets."
They refer to a new index published by their organization to back up this statement. They contend this study covered 75% of all home purchase loans made in the U.S. during the first 3 months of 2014. Their conclusions?
1. Half of all these home loans had a downpayment of less than 5%.
2. Almost half of the borrowers monthly mortgage payments and other debt exceeded 38% of their pretax income.(38% is the traditional threshold for acceptable payment burdens).
3.The FHA(Federal Housing Administration) is the prime source of this risk. The FHA now guarantees more than 25% of the new loans and does so with little regard for risk, they claim.
4. U.S. housing prices rose 11% last year, and the Fed's easy monetary policy - which has kept mortgage rates very low- has been a key factor in this price rise.
5. There has been strong investor demand for distressed properties, while at the same time, the supply of available homes has been limited.
6. Housing starts, though rising, are well below normal.
The danger as they see it? Housing prices in the hotter markets around the country may already be above the levels warranted for household income, rents, and other economic conditions. Is a bubble in the making? Hard to say, they claim. Their bottom line in all this is that today's home buyers need to pay close attention to risk. They need to realistically assess their own financial situation before making such an important decision.
If a window of opportunity appears, don't pull down the shades....Tom Peters
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Delinquencies Expected to Rise
Credit reporting agency FICO says about half of all U.S. and Canadian bankers are expecting a rise in 2014 in delinquencies on auto loans, credit cards and other types of consumer loans. Says Andrew Jennings, chief analytics officer, "Given that delinquencies are so low at the moment, it really has no direction to go but to increase. I don't believe it's cause for concern, but something to take note of."
Ok, let's take note of it!
Most people do not listen with the intent to understand. They listen with the intent to reply... Stephen Covey, Author, 7 Habits of Highly Effective people.
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If I don't listen with the intent to understand you, please call me on it!
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