Tuesday, May 22, 2018

Don't Give Up on Buying a Home

Wow, my last post was so popular I'm back again with another!  (Not really, it bombed but that's OK as it's out there in blogland for someone who might be enlightened).


Really guys, I want to tell you about something that is now and present.  Buying a home.  You'll say,"we can't buy a home because we don't qualify for a loan".  I totally understand that.  But, there's always another way.

If you've read my blog, you'll know that I've invested in real estate for many, many years.  Throughout those years, many times I've sold a piece of real estate to a buyer through a real estate contract.  Here's what happens.  When you want to buy a home, you go to a bank or mortgage lender and apply for a loan.  If you get approved, that bank or lender will give the money to the seller of the property and then you will pay back the lender at a set interest rate over a period of usually 30 years.  OK....but you don't qualify for a loan.  No worries, you just need to find a property where the seller will be your lender or your bank so to speak.

Here's the real life scenario that happened just two years ago.  Years earlier, I had invested in some property in an area of California when the prices had dropped.  I secured an excellent tenant for one of the homes and he paid on time as agreed.  Less than three years ago, I decided to sell my real estate holdings in this area.  I asked my tenant if he was interested in buying the home he was renting.  He said "yes, but I don't have money for a down payment and I don't qualify for a loan".  I told him no worries as I would be the banker for him.  The following took place:

1.  We agreed on a purchase price and interest rate with a thirty year amortization.
2.  A preliminary title report was ordered as the buyer needs to confirm that the property he is purchasing is free of all encumbrances. (The seller owns the property free and clear).
3.  Our local title/escrow company drew up the legal documents which included a Real Estate Contract, Promissory Note and the Deed of Trust, held by safekeeping with the escrow company.
4.  There are closing costs involved in purchasing/selling real estate.  The buyer's closing costs were around $2,000 and I did not take any down payment on the sale.
5.  The legal documents were signed and recorded with the county.

In a nutshell, my tenant became the homeowner for less than $2,000!  He pays me on a monthly basis, and his monthly payment includes principal and interest on the loan, along with taxes and insurance.  The local escrow/title company services this loan for both the seller/buyer at a small monthly fee.

YOU can be a homeowner.  You just need to find someone out there who is willing to sell you the property on a real estate contract.  That seller is basically going to by your lender.  It's good for the seller too if he doesn't want to sell, get all the cash in hand and pay out a large portion to the IRS for his share of taxes.  This way, as the money comes in, his taxes to the IRS on the sale of this property are proportional.

Don't give up yet...you can also LEASE TO BUY.  I have an investment property now that I am negotiating this scenario.  You agree to lease the property at X amount of dollars for a term of X months/years.  A portion of that rent can be credited back to you if you decide to exercise the option to buy.  Again, it should all be in the contract you draw up with the seller.

Now my tenant is a homeowner.  He and his family are thrilled to be able to own a home in which they show pride and take extremely good care of the property.  Already, his home has increased in value and if he were to sell today, he could walk away with a profit of approximately $50K.  Not a bad deal after all.

What I want to say is that if there's a will there's a way.  It doesn't matter where you live in this world, don't resign yourself to thinking "no, it won't work".  You don't know until you try.

I hope this can help someone out there in this huge world.  And, I'd love to hear your feedback.  If you have questions, I'll be sure and try and answer them.

Sending you my best wishes,

Pat


5 comments:

  1. we are homeowners and so grateful! I did read all of your past post too! I appreciate your thoughts and advice! sending LOVE to you!

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  2. Good advice, Pat! We bought our land through an owner's contract. It's a good way to follow your dreams! x Karen

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  3. Somehow I had missed these posts you wrote on buying a house, but I'm so glad you mentioned them at the end of your most recent post so I'd know to go looking for them. We've gone what has become the conventional way to purchase our home, but this was really insightful. It's not a scenario that I'd ever contemplated before (from either the buyer's or seller's side). Thank you for sharing, Pat!

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