Offering Terms Will Set Your Property Apart
In today’s market, sometimes it takes more than a good rehab and home staging to find a buyer for your property. With home prices bottoming out, trying to sell for a reasonable price is proving to be more difficult than ever. However, if you have the ability to offer owner financing, you will not only differentiate yourself from the competition, but also get top dollar for your property.
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A perfect example of this is a house I own in a gated lake community just north of Atlanta. Many of the homes in this community are second homes and with the job market the way it is, many owners have been forced to sell. As a result, there are an abundance of homes for sale in this community and prices have been driven down. We have been entertaining the idea of selling the property, but didn’t necessarily want to shortchange ourselves in the process. On a whim, I put the house on the market last week for about $20,000 higher than what I believe to be market value for the property. I did this because my listing included the option for owner financing and I believe this will allow me to get a higher price. Interestingly, we have had a ton of interest in the first week. Almost every potential buyer is interested specifically because we are offering financing.
I think this is a testament to the fact that there are a lot of buyers in the market right now who simply don’t qualify for financing. With lender guidelines tightening and more and more people with injured credit, owner financing is becoming an excellent alternative for many would be buyers. As a seller, it is an excellent way to generate immediate interest and quite possibly, achieve a higher sales price.
As an investor it is important to understand the principle that offering terms allows a property to deviate somewhat from normal market forces. While it is a great tool for increasing the price of a property or the speed at which it sells, the same may be true for other homes in your investing market. It is important to know when terms are involved in a sale as the sale price (or number of days on the market) may not reflect the true market for that area. This is especially important to remember when researching comparable sales for a particular investment property. There have been times in my investing career where a particular comp looked very strong and may have swayed me towards a particular investment property. However, after further evaluation, it was determined that the comparable property probably wasn’t a good indication of the market because there were special terms that had been offered.
For those investors who don’t know how to go about structuring an owner financed transaction, there are a wealth of articles on BiggerPockets.com which can point you in the right direction. For those investors who have no interest in holding a note, understanding how to use terms for acquiring properties can be equally as beneficial. (In fact, many of the info products that have been developed by real estate gurus over the years revolve around this strategy.)
At the end of the day, successful real estate investors need to have the ability to adapt to changes in the market. With conventional financing as tight as it is right now, knowing how to use private financing is becoming an increasingly important strategy for investors to learn.