As explained in the last issue, seller financing can be an extremelyuseful option to sell a house in a slow real estate market.Unconventional private lending is a great way to increase the overallsales closing ratio. When the property owner is willing to "carry back"a note, it is often possible to obtain a higher selling price andreduce the time needed to find a buyer. Plus, creating a note securedby real estate can give the seller a steady, interest-generating incomestream for their long-term future.
The Challenge: A Different Demographic
Home owners who are ready to offer a private loan in order to selltheir houses are still faced with a stumbling block: how to find buyersin need of seller financing. Most property owners don.t have anyexperience in finding individuals interested in buying a "high ticket"item like a home directly from the owner.
When property sellers work within the established real estateagent process to find buyers and close a deal by "traditional" methods,it is generally safe to assume that the vast majority of thesecustomers will qualify for bank financing. In order to pursue privateseller financing to sell a home, however, a property owner will need toattract home buyers who do not have adequate credit to buy real estate- a significantly different demographic.
The key to successfully orchestrating a seller-financed real estatedeal is getting the right buyers through the door - just like atraditional property sale.
In order to get motivated buyers interested, the seller will need touse a targeted marketing technique designed specifically for the"unconventional buyer's market". The most effective advertising methodto tap into this distinctly separate pool of buyers is surprising tosome.
Unconventional Marketing
The seller's best strategy for finding their credit-challengedbuyers would be to list the property in places that are frequented byindividuals that do not have a real estate agent. The newspaper is oneof the best places to start putting out the word.
The majority of home buyers looking for seller financing start bysearching the "For Sale By Owner" ad listings in the local paper.Seller financing originated and took off via this print medium. Even intoday's Internet-dominated business world, newspaper advertisingcontinues to be an effective means to reach those looking for sellerfinanced deals, so it makes sense to start the advertising here. Asimple sale ad including the line "seller financing available" or"credit issues OK" should help to generate genuine interest from theright potential candidates.
Orchestrating the Deal
Once interested buyers start coming around, the seller can choose towork with the party that brings the most to the closing table in termsof the down payment. Of course, larger down payments are better thansmaller amounts, but it is entirely up to the property seller to decidewhat is acceptable.
Once the details of the initial payment, payment term, interest rate,and any necessary clauses are established, the buyer and seller couldcreate a new seller-financed note. If the seller needs moneyimmediately to pay their down payment, the note terms can bespecifically tailored to ensure that it's attractive to cash flowbuyers. Once the newly-created note is sold, the property seller willhave "cashed in" their future monthly payments for an immediate lumpsum of cash.
The details of the note creation are easily handled withstandardized boilerplate or the assistance of an attorney; some notesellers are able to manage the sale of their home without any paidlegal counsel at all. In fact, once the seller understands thepotential advantages of seller financing and takes the proper steps tomarket the property to the target buyers, the final steps in cementingthe note deal are usually much easier than expected.
Smiling Dog Notes
