You’ve probably heard of people offering a year’s worth of free pizza and beer just to be able to sell their house. How about the man from Essex who gave away a £150,000 Lamborghini? When Ian Usher said to himself- " you need to sell your house fast", he auctioned his whole life on eBay to do so?
The credit crunch has made what has always been a daunting task – selling your house fast, that is – into an even greater challenge. No wonder people are now finding unique, creative, and sometimes crazy ways to sell your own home. But the credit crunch has made it hard for buyers as well. Whereas it was relatively easy for anyone to get a loan a few years ago, lenders have now tightened up rules on who they’ll lend money to.
In other words, there are potential buyers out there but they’re just having a hard time taking out a loan. Well, if you’re selling and having a hard time finding a buyer, then the answer may lie in what is called "creative financing."
"The goal is to make it easier for buyers to say ‘yes.’ This means creating better value for the buyer or less risk, or easier financing," management and marketing consultant Nan Andrews Amish told Bankrate.com.
Here are three major options for creative financing:
- Let the buyer assume your mortgage (if your lender allows it).
Simply put, in this arrangement, the buyer takes over payments on an existing mortgage. While banks traditionally do not allow mortgage assumptions, today’s economic circumstances and market conditions may be slowly changing that.
If a homeowner is in financial trouble, a lender would rather allow the loan to be assumed rather than to repossess the property, Bankrate.com quotes real estate investor Jason Hanson. Some large banks have been allowing this kind of arrangement on certain types of mortgages.
It is especially easy to attract buyers if you are lucky enough to have a mortgage that came with a low interest rate. A deal like this would also save the buyer closing costs associated with getting a new mortgage.
Just a few words of caution though before both parties decide to engage in this type of arrangement. First, make sure that both the rate and terms, such as prepayment penalties, are workable. You don’t go for it, for example, when there’s a £80,000 prepayment penalty on a £200.000 loan.
A seller should also protect himself by getting a written release from further liability from his lender. You never know if your buyer will miss payments in the future. Consulting with a solicitor is highly recommended, as deals like this can often be confused with "subject-to" deals, in which the buyer agrees to take over monthly payments on an existing mortgage, but the seller or original borrower remains liable if the new buyer fails to make those payments.
- Offer a lease-to-own deal to help the buyer build a down payment.
Think of it as renting out your house, but with the tenant actually having the end goal of buying it. The rent is usually deposited into an escrow-type account, and then applied towards a down payment.
There are generally two ways to go. With lease-options, the buyer can opt not to buy at the end of the option period, but he will lose the down payment. With lease-purchase, the buyer has to purchase the house.
Bobby Wallace, an affiliate of 1800sellnow.com, suggests sellers "do everything to make the buyer truly realize that this is a tremendous opportunity to enhance their credit and not waste it." They buyer is also able to move in immediately even though he is not yet purchasing the house.
The downside for sellers though is if market prices go up, you could be locked into a low selling price. That is a risk you should be willing to take.Also, you should find a buyer who is likely to be able to get a mortgage down the road. And again, just as in any property deal, it is always best to hire a legal professional to handle the paperwork.
- Sell to a cash home buyer.
For a quick house sale this may well be the least creative of all, and it may not even count as financing, but it is as straightforward, practical, fast, and hassle-free as a property sale could get. All you have to do is choose among the many cash home buyers throughout the United Kingdom; most of them have websites.
You can inquire online or give them a call, and they will make you an outright "offer in principle." If you accept that, they will make a proper valuation of your property, and then make a formal written offer. If you choose to accept, you will have the cash on hand in just a few working days or weeks. But the offer comes with absolutely no cost or obligation to the seller.
Because the negotiations are directly between you and the cash buyer,you can forget about estate agent commissions, legal fees, and closing fees. You don’t even have to bother repairing or renovating your house, they will buy your house in whatever condition it is in.This is truly a win-win deal for both the homeowner and the purchaser.
