How to Sell for More
(A continuation of How
to Sell a House)
By Steve Gillman - 2006
We start this look at how to sell for more with a strategy
that generally only works if you own your home free-and-clear.
The second page covers other strategies that are suitable for
almost any sale.
Of course using a good real estate agent (see Chapter 4) and
cleaning your home up can help you get a higher price. Making
cost-effective improvements (see Chapter 5) can add thousands
to your pocket too. That isn't all you can do to get a higher
price, though. Here are a few more possibilities.
Seller Financing
An example of seller financing: Years ago I bought a rental
property, and nine months later sold it for 15% more, without
fixing or improving a thing (home prices had only gone up 3%
in that time). The easy terms are what sold it. I took $1000
down, and I still get a payment every month, with 9% interest.
You may not be able to offer any financing help. If you have
a mortgage for most of the value of the home, and it has a due-on-sale
clause in any case, there is little you can do. On the other
hand, if you own your home free-and-clear, or have a low and/or
assumable mortgage balance, you might be able to help the buyer.
Why should you?
The primary reason you may want to offer financing help to
the buyer, is that you can sell for more. As you can see from
the example above, buyers pay for easy terms. This can mean a
low down payment or low payments or just a chance to buy when
they can't get a bank loan. It all means more money for you,
if you do it safely, and there are more advantages beyond a higher
price.
It is a chance to get a decent return on your money. The 9%
I'm getting is nice, but the true return was much higher, since
I also sold the property for 15% more than I paid, and I get
9% on the entire balance. In other words, you not only get a
higher price and higher interest, but you also get that interest
on money you wouldn't have had if you sold at a lower price.
You can also sell your home faster this way. Anytime you expand
the potential market for a property, you increase the odds of
selling it fast. Selling with easy terms definitely invites more
buyers to look at your home.
It is a way to more easily sell difficult properties. If you
have a home that is difficult to finance conventionally, offering
seller financing may be the only way get it sold at a fair price.
There aren't many buyers out there with enough cash to buy your
home outright.
Safety Tips
By helping a buyer with financing you can sell for more, get
a good return on your money, have a faster sale and sell a home
that is otherwise difficult to sell. These are all good reasons
to consider this strategy, but how do you do it safely? Here
are some guidelines and possibilities.
1. Get a large down payment. This is the most obvious way
to be safe. If you have 15% or 20% down, and the buyer defaults,
you can afford to pay a lawyer to help you foreclose on the home
and get it back. Even after his fees and a quick sale, you shouldn't
lose a penny.
Of course, the buyer may not have a large down payment. In
fact, this may be one of the primary reasons he is looking for
seller financing. If you want to get that higher sales price
and risk a small down payment, look for other ways to make the
deal safe for you.
2. Get other security. Suppose a buyer wants to buy your home
with a small down payment, and you like the return you'll get
on the balance owed? You might make the transaction safer for
you by taking a mortgage on other property the buyer owns. Does
he have a cabin, second home, or piece of land? If the buyer
is worried about "tying up" his other property for
too long, agree to release the other mortgages when the loan
balance is paid down to a certain level.
3. Check the buyer's credit. Have her pay for and bring you
a credit report. Bad credit may sometimes be okay, but the type
of bad credit is important. Unpaid hospital bills she is disputing
are not as relevant as unpaid loans. Several previous problem-free
loans and lines of credit are a good signs.
4. Trust your instincts if they are reliable. If you are usually
right about people, give some weight to your judgment of their
character. I'd trust a man who felt morally obliged to pay his
debts over a playboy that happens to have decent income at the
moment. Still take other precautions too, of course.
5. Consider the whole picture. Suppose a bank will loan 90%,
and is okay with you taking back a $5,000 second mortgage, allowing
the buyer to get in with what cash he has. If you're getting
$6,000 more than you expected to by accommodating the buyer's
needs, where's the loss? You're okay if he never pays the $5,000,
right?
6. Talk to a lawyer. Different types of contracts are handled
in different courts, and this can be important. For example,
maybe in your area it takes two years to foreclose on a mortgage,
but only six months to foreclose on a "contract for sale."
Knowing these things can help you sell in the safest way.
Now we continue with suggestions for how to sell for more
- ones that almost any seller can use.
The book continues here: Higher
Price - Several ways to accomplish this.
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