BALANCING RISK REWARD IN LAS VEGAS SELLER FINANCING AGREEMENTS
When home prices in Las Vegas are on the rise, one side effect is that first-time homebuyers may run into a financing obstacle. Although the stricter lending standards of the past few years have been easing somewhat, it still can be difficult for some folks (younger buyers, especially) to purchase the Las Vegas home they have in their sights. In that situation, an alternative to a traditional bank mortgage is seller financing. Many prospective buyers know little about the details that make up a seller financing agreement, and how it can–or cannot—help them secure a home. What Seller Financing Is… It’s as simple as the words themselves. When part or all of the purchase price of a property is carried by the current owner rather than a bank, it is considered to be “seller” or “owner” financed. Buyer and seller reach agreement on the loan details, including the monthly repayments, term of the loan, and interest rate. The security for the loan is the property itself—a fact which is documented on public records for the safety of both parties. The Benefits of Seller Financing… For the buyer, the principal benefit of seller financing is avoiding the requirements that are the hallmarks of traditional bank loans. Motivated sellers, who may be anticipating having trouble selling their home in a timely manner, be willing to advance a loan to buyers who do not traditionally qualify for a loan. Another benefit for the seller is having an investment which returns a fixed rate of return—one that is secured by the property. In the case that the buyer defaults on the loan the seller can foreclose on the property. With seller financing of a Las Vegasproperty, the buyer will often compensate for a lower-than-bank-required credit score by agreeing to pay an above-market interest rate (another inducement for the seller). Financing Part of the Purchase Price… In some cases, the buyer may be able to secure a traditional loan for only part of the full purchase price. In that case, the buyer can ask the owner if they would be willing to finance the missing piece. Again, the buyer may sometimes offer an interest rate that is above current market rates as an inducement. It’s often possible for the buyer to plan on refinancing the ‘missing piece’ at a later time when the credit picture has improved, hoping to lower the combined interest rate. But, then… These advantages are so clear, you might expect that Las Vegas seller financing arrangements would be very common. There are several reasons why that’s not true. First, owner financing can only be offered by sellers who own their property outright. Second, should a buyer fail to live up to his or her side of the agreement, foreclosing on the property can be a lengthy and expensive process—during which it’s likely that no money will be paid by the buyer in default. In Las Vegas, seller financing can be a deal-saving alternative for buyers who may not meet lending standards set by banks, but who can nonetheless afford to service a mortgage. Not all sellers will consider owner financing—but for those who are willing to support the added risk, it can meaningfully expand the pool of prospective buyers. Seller financing is just one of many possible strategies. If you are thinking of buying or selling in Las Vegas, give me a call as soon as possible to take advantage of this summer’s market opportunities!
SELLING A LAS VEGAS HOME MEANS RECRUITING A SKILLED TEAM
It’s a bit complicated, selling a home in Las Vegas. Although you can make a case for the feasibility of doing the whole thing yourself, there are enough areas of knowledge where experience, expertise, and even licensure are recommended that few would ever try it. At the end of the day, selling a Las Vegashome is a true team undertaking. And you’re the one selling a home, so you’re Captain. In addition to interviewing and selecting the Las Vegas real estate agent you will be working with, there are other professionals you should plan to engage as well. Here’s who and why: The Inspector It’s quite a good idea to have a professional inspection performed at your property before selling a home. In addition to any major issues that could affect your smartest listing price, you want to be made aware of any minor issues before buyers come across them. Sometimes small details that are easy to fix can upset timing and even derail a deal entirely. The Appraiser As a seller, you shouldn’t try to value your property blindly. To do so runs the risk of over- or undervaluing it—and a smart listing price is a key element in the successful selling of a home. Your agent will give you key guidance on pricing. However, having a professional appraisal performed in advance can help support your price to potential buyers (especially if you are asking a high number that could be difficult to otherwise support). While the buyer’s bank will require their own appraisal, the money spent here in advance can help speed up the offer and/or negotiations. Financial Advisor The most difficult part of selling a home is finding and attracting a serious buyer. Fortunately, this is a burden your Las Vegas real estate agent will shoulder for you. But before everyone has signed on the dotted line, it’s important to understand what the financial and tax implications will be once you’ve sold. If you have gains, you want to know how much—if any—tax burden it will trigger. If there is a loss, you’ll want to know how to turn that to your advantage. Either way, knowing the tax implications before you list may well affect the price you list at or will accept. Thinking of buying or selling a home in Las Vegas soon? Why not come by or give me a call? I’ll be here at the office, working hard for my clients all summer.
GOOD NEWS FOR SOME FHA APPLICANTS WITH LAS VEGAS FORECLOSURES
There is encouraging news for some prospective homeowners with a Las Vegas foreclosure in their recent past: more common sense seems to have entered the picture. The financial crisis that began in 2007 caused global disarray: across the U.S. (and Las Vegas was no exception), large numbers of responsible homeowners were clobbered by the fallout, often finding their incomes suddenly reduced or even obliterated as business cutbacks and closings reverberated through the economy. The Las Vegas foreclosure rate jumped as a direct result—and it’s taken quite a while for the effects of that to work through the system. But even after the economy has resumed something like normal activity, more than a few local residents have found themselves having to deal with how a Las Vegas foreclosure on their record dims their home ownership prospects. Even if the reason for the Las Vegas foreclosure was due to circumstances beyond their control—and even if they had recovered enough to now be able to service a home loan—many found that qualifying for a mortgage with reasonable terms was difficult to impossible. That was bad for everyone, and the effect on the market was such that the Federal Housing Administration decided to address the problem in specific situations. For those who qualify, it can make the availability of a normal home loan newly possible. The idea was to enable FHA backing for borrowers who could show that their Las Vegas foreclosure or bankruptcy was caused by external economic factors. With few exceptions, borrowers had not previously been eligible for an FHA loan until two or three years after a foreclosure. Exceptions to that rule were granted only if the death of a spouse or medical emergency had caused the forfeiture: now “loss of income” was added as an extenuating circumstance. It means a much swifter rehabilitation. For those who can demonstrate that a job loss, pay cut, or decline in business income caused their Las Vegas foreclosure, the previous years-long waiting period may be waived. There are other details that can affect any individual applicant’s eligibility—and the guideline change is temporary—but overall, the recognition that the Great Recession was the true cause of many an Las Vegas foreclosure does seem to be a fair accommodation. In the wake of a foreclosure, you’d expect it to take more work to arrange a new home loan, and that’s the case. But the good news is that for those who qualify under the widened eligibility guidelines, they are increasingly likely to be able to obtain a new home loan—even following a recent foreclosure in Las Vegas. Whether or not that is your situation, if you’re looking to buy a home this summer, Step One is to get pre-qualified. I’m standing by to help get the process rolling!
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