Who are Investors Going to Sell Homes to Now?


With the new housing bill that just passed on Wednesday and goes in to effect on October 1, how are home buyers with out a down payment going to find financing to purchase your investment?  

The new bill eliminates seller-funded down payment assistant programs for FHA loans. Many investors and sellers are now faced with finding new creative ways to selling their properties.  Investors need to quickly go on the offensive to find borrower that have a down payment.   Finding these individuals is easier than you think.   For the last three and half years first time home buyers have paused on their home buying because housing was unaffordable and then the market began to free fall. As we near the bottom these buyers are starting to consider buying again.  Since 2003 housing prices soared across the nation and these buyers not only can afford a home, but they have been saving money for 3.5 years.  This could be just enough to put 3% to 5%  down on your investment property that you are selling. 

 Where do we find these individuals?  This is the million dollar question.   We can first start with the internet.  Websites like www.biggerpockets.com have hundreds of potential buyers that come to them seeking information on the home buying process as well as looking for a great deal.   But really the only way to selling any thing to them is to become involved with the sites, create a profile, share your expertise, and then give these customers an opportunity to buy your home(s).   Does this sound like a work?  It is, but this is the new real estate age, nothing comes for free and one must work smarter not harder.  Use the web to benefit you, even beginner investors can create a niche in their community by being online.  Trust me the next generation of home buyers are coming of age and they now have their computers in their front pocket, its called a PDA.

Next week we will talk about the loans that will replace FHA loans now that the down payment cant not be seller funded.

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  1. The elimation of DPA is going to have a huge impact on the lower end market. This has effectively just taken a huge chunk of people out of the buying pool. Although this will hurt, I simply cannot find a reason not to eliminate it.

  2. As much as it has impact our business as agents and investors, I agree with rehab702. It will take time but people who desire homeownership will adjust to the fact they have to save a down payment and it will become the norm again.
    Agents and investors will evolve and adjust too (once we stop complaining).

  3. Does anyone remember the time when people actually had to work and save for a down payment? I think that the discipline required to do that also taught people financial responsibility. That isn’t such a bad thing.

  4. Chris Lengquist on

    Of my last 5 closings 4 had 20% down payments and two of those were first time home buyers.

    There are buyers out there with money. You just have to find them. Now is not the time to pull back on marketing whether you are an investor, realtor or seller.

  5. Thanks for the great articles. The same is happening in South Africa. The intertest rate in South Africa is sky high so the house rental industry is booming. People in South Africa can’t afford to buy right now. I guess it’s the current trend in the industry.

  6. Colin - Florida Property on

    I’d echo rehad702’s comment. The few years up to 2006 were abnormally good and we’re now (possibly) getting back to more normal times. It’s a problem in an instant-gratification society, though – who wants to “work and save” when they’re used to getting what they want when they want it?

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  8. jc in c'ville va on

    20% DOWN !?!?!? You have to be joking. Just bear with me for a minute as this is something that is a repeated statement that has been really getting my goat recently.

    December 2000:
    I made $30k a year
    Average house in my area about $80-100k.
    20% down = $16-20k ~ 66% annual salary (few years of serious saving)

    December 2007:
    I make $60k a year (after some serious negotiations).
    Average house $380K
    20% down = $76k ~ 127% of my now DOUBLED annual salary.

    PEOPLE NEED TO SAVE ? Save what? Some of the frivolous cash flying around.

    Lets look at what cost more in the last 8 years:
    FOOD (rice alone since 2006, 217%)
    ENTERTAINMENT—my cable bill more than doubled 3 years ago before I got rid of TV in the house.
    UTILITIES—electricity 18% this year alone
    AUTO GAS—over 250% since 2000
    RE TAXES— 12-18% yr/yr, my house in assessed in 2000 @ $85k 2007 $200k
    FED TAXES—That raise put my family in a whole new tax bracket =)
    AVERAGE HOUSE PRICE – just look around

    Now I DOUBLED my salary in one year, how many Americans can say that they have managed to do that in the past DECADE.

    The only thing that has NOT gone up significantly is the salary, = purchasing +saving power, of the average American citizen.

    Without an appreciating house to sell, or a rich dead uncle, where does the average person plan to get their 20% down payment from.

    If I have to save till I am 50 just to put the down payment on my house, how do I plan to pay the 30 year mortgage?

    On my fixed income retirement?
    How about using my 401k that has tanked over the last few years?
    Oh I know, social security! That ought to be viable in 2030.

    No, I’VE GOT IT. I’ll get a nice job at Wal-Mart like many sneior citizens making MINIMUM WAGE!

    Even if you have the savings where are you gonna keep it?
    In the 401ks that are taking a beating?
    In the banks that are losing billions and being taken over by the Fed?
    How about under your mattress, those depreciating greenbacks ought to be worth a lot in 30 years what with the rising price of toilet paper.

    Truth is we have all become greedy, greed is what drives the US economy. When we hurt the whole world hurts.

    Unfortunately, I am at a loss as to how we turn the clock back on this whole shell game. But while the average American is trying to feed and shelter themselves all while PAYING MORE for the privilege of going to work too actually make less. Where exactly are we supposed to save 20% down payments for $200k-400k houses?

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