No Home Appraisal Had Been Ordered

Category: Finance, Mortgages.

Home mortgage loans are not created from thin air.

If your property is priced too high, it may sit on the market much longer than it has to. The home appraisal is vitally important to financing your home loan at the correct value. If it is priced too low, you leave too much money on the table. Some homes in smaller markets have a difficult time getting bank financing simply because of the size of the mortgage loans. While home owner loans are gaining in popularity, there are some very important things you need to know that will not only save you some money, but help make you more money as well. Size does matter.

That is exactly what happened in this case. If your loan requirements are too small for the traditional lenders, you have to create home loan lending solutions. The property seller provided a home owner loan so the buyer could purchase the single family residence in a south Georgia community. A promissory note was created for$ 43, 000 at 10% interest and interest only payments. The home owner determined the sale price of the property would be$ 45, 00The buyer provided a$ 2, 000 down payment. There was a balloon payment due in five years. No home appraisal had been ordered.

The buyer s credit was fair, leaning towards good. Four payments had already been made on the loan, and things were moving along according to plans. Naturally he agreed to take a look. At this point the seller and I discussed the possibility of pulling his cash out of the transaction with a note sale. All of the required information was gathered, and evaluated, processed. Of course one solution was for a purchase of the whole note, and another was for all of the payments and a portion of the balloon note. We developed a couple of options for the seller to consider.

Honestly, the quotes were very good. He actually agreed with me. Either solution would have been an excellent return for the seller. Then he shared this truth. Of course I asked how much of a discount and he was not sure, but he thought it was pretty big. He had sold the property to the buyer at a discount. When I checked the value of the property, I determined it was worth somewhere between$ 66, 000 and$ 77, 00Remember he sold it for$ 45, 00That means his sale price discount was between 32% and 42% !

He went on to provide a home owner loan to finance the transaction! In his efforts to quickly move the property he actually left between$ 21, 000 and$ 32, 000 on the table! This was a perfect example of what not to do with seller financing. Even though the cash we offered was substantial, it was not possible to make up the difference created by such a large sale price discount. By agreeing to such a large sale price discount, the seller simply left entirely too much money on the table. Ideally, a home owner loan will justify a small premium in the sale price because of the added risk by the property seller. If he had simply ordered one he would have easily made a lot more money on this transaction.

The home appraisal is an excellent tool for determining current market value. For reasons like this, our philosophy is the home appraisal of the property should also be the contract sale price for the property. In a case like this one, the seller would certainly have been able to capture close to 90% of the money left on the table. Even though we deal in discounted mortgages, our payouts are typically much greater than you might expect. Each transaction is unique and requires special attention and analysis to provide the biggest payout possible. We can not only help you save money, but we can help you make more money as well. If you are considering a seller provided home owner loan for your buyer, you might want to take advantage of the services of a discount mortgage professional.

In the example described above, it was a great deal for the buyer, but not nearly as good as it could have been for the property seller. Even then he will never recapture the money lost with the discount he gave the buyer. The property seller chose to maximize his cash flow and profits by having the transaction run to full term. In the current residential home sales market, you really need to explore non- traditional lending sources. When you get a professional home appraisal to validate the sale price of your property, that is a great start. It will probably save you some time and money. From there your buyer evaluation, and subsequent mortgage, deal structure loan will more closely resemble a win- win situation for the seller and the buyer.

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