Creative Ways to Buy/Sell Real Estate in Today's Market

Whether you’re buying or selling a house these simple techniques can help you reach your objective and solve the problems you face as a buyer, seller, or real estate professional.

Temporary Seller Financing - It’s a well known fact that owner financed properties sell faster and for more money than your typical conventional transactions. However, most homeowners/sellers want to get paid today. This is a strategy where you get the best of both worlds…sell at a higher price and collect the sale proceeds at the time of closing.

Here’s an example of how it works…

Basically, you (seller) set the sales price (should be the appraised value), get a down payment, and create a 1st Mortgage Note that an investor will purchase for up to 85% - 95% of face value at or right after the closing (depending on LTV, credit of buyer, and rate/term of note).

There are many local and nationwide companies that will buy your newly created note. Of course there are certain specifications that need to be considered when creating a marketable note, therefore, consult an expert and/or real estate attorney.

Benefits

· Higher sales price
· Faster Closing
· Lower Closing Costs
· Easier qualifying than that of Conventional Financing for fixers
· More lax underwriting standards

Installment Sale/Contract for Deed - Another form of seller financing where a homeowner with considerable equity takes back all or part of the market price of the property in the form of a promissory note secured by real estate. What does this mean? In simple terms…you finance the property for the buyer and hold title until terms of the agreement have been satisfied.

Again, caution must be taken in the wording of the created note to protect your interest.
Benefits of the Installment Sale

· Defer Capital Gains
· Secure Investment (interest earned on total loan amount)
· Highest possible sales price
· Faster Closing
· Lower Closing Costs

Explanation of Benefits

· Used as Retirement Vehicle this creates a low taxed income stream, which allows Medicare to kick in sooner than it would with a person with a large sum of cash in their bank account. It allows the beneficiary of the note to leave something to their heirs (all tax benefit) upon exiting.
· Interest only payments-Defers taxes indefinitely. Better/safer investment than most anything.

There are many variations to this type of financing to reach any desired outcome.

Lease Option/Rent-to-Own - The buyer enters into a lease agreement with the seller with an option to buy at a later date. Length of time can be 3 months to 5 years. The Lease payment will be determined by buyer and seller. Buyer pays the seller option money for the right to later purchase the property. The lease option money is considered a down payment and is usually non-refundable. The purchase price can be pre-determined or a percentage of the market value at the time of closing. A portion of the monthly rental payment typically applies toward the purchase price. While the buyer isn’t obligated to buy the property if he/she chooses not to exercise their option all contributed monies will be forfeited to the seller.

Benefits

· Tax Benefits of investments property ownership
§ Depreciation write-offs
§ Capital loss write-offs
· Helps the buyer save down payment and build credit


Lease Purchase - Same as the lease option except the lease is obligated to purchase the property at a pre-determined time.

1031 Exchange - A 1031 tax deferred exchange allows you to roll-over all of the proceeds received from the sale of an investment property into the purchase of one or more other like-kind investment properties. At closing, proceeds are transferred to a third party--called a facilitator or qualified intermediary--who holds them until they are used acquire the new property.

Benefits

· Consolidation of Properties
· Increase Depreciation (raw land to depreciable property)
· Management Relief
· Leverage (more investment $$ to Invest due to no Capital Gain)

Short Sale - This is a sale that involves the bank discounting the amount owed due to a hardship. Although it sounds straight forward and simple it’s not. The bank may give distressed homeowner a Short Sale kit and offer to lower the price a little however it requires a real estate professional to make a case for the homeowner in order to get the discount usually needed to prevent foreclosure. Homeowners be wary of any individual asking for an upfront fee for consultation on a short sale.



Disclaimer- I am not an attorney or Accountant, nor do I pretend to be. Please consult your Attorney/CPA for tax and legal advice.