If you are thinking about buying or selling a home in Manhattan Beach or any of the Beach Cities but are a little unsure about the current credit market here are a few old ideas that may be worth considering. Interest rates were not always 6 % with lenders jumping all over themselves to hand out money. There was a time when lenders thought piggybacking was a game you played with your kids. The fact is that if you want to sell a home or buy a home there are a number of things you can do to make it happen. None are illegal, immoral or fattening… so now might be a good time to think outside the box.

 Seller Financing: Back in the dark ages sellers used to offer to carry back a second TD for buyers who had a good down payment, good credit and needed a little extra cash to make the deal go. This may not be practical if you need all your cash to buy a new home but there are a number of sellers who don’t need all the proceeds from a sale. The benefits are good for both sides… buyer and seller… If a seller carries back some of the proceeds in the form of a note he may avoid capital gains on that money until he actually receives the money. This is referred to as an installment sale. For a buyer who has a good down (20% +) but needs a bit more to stretch from a conforming first to the sale price this may be a far better option then a lender second at a high adjustable rate. Historically most seller financing was a bit below lender rates but significantly higher then they would make in the bank. If you have a lot of equity that you won’t need but would like to sell forget offering a car.. instead offer to carry back 10% -15% of the price as a second Trust Deed and you just might find a buyer. I believe that as secondary financing becomes more difficult to obtain this may be a good compromise for all parties.

 Pay Points on a Loan: It has only been in the last 6-8 years that buyers thought paying points (a point is typically 1% of the loan amount) on a loan was a bad thing. It used to be very common on a purchase money loan for the buyer to pay 1 or 2 points upfront to get a better rate. As rates got less expensive and you could get a fixed rate zero point loan under 6%… this practice stopped. But in today’s real estate market it might make some sense to reconsider paying a point to get a lower rate. On a purchase money loan the points paid upfront are treated like interest and you can write the amount off on your taxes in the first year of your purchase. This is not the case if you refinance. If you refinance the points can only be written off over the term of the contract.. that is if you have a 30 year loan then you have to write the points off over 30 years. You need to do the math to see if this makes sense but if you are planning to be in your home for 5+ years then it may well be a good choice to pay points upfront…. especially if you are going to choose a fixed rate loan.

Sellers Pay Buyer Closing Costs: This is a concept that we haven’t seen for sometime but it could make the difference for a buyer who is trying to choose between two homes. Also as the FHA and the Conforming loan limit have increased to $729,750 there will be a number of buyers who want to use FHA financing. FHA requires the Seller to pay part of the closing costs. If you have a home valued under $725,000 and it’s not selling you might want to consider offering to sell FHA. A qualified buyer only needs 3% down so you could open your home up to a number of potential buyers who don’t have 10% or 20% down. FHA is also a good tool for those who may need to refinance.

Have questions feel free to e-mail  me… I’m always happy to answer any questions.