Home sellers who offer creative financing options expand the list of potential buyers for their homes. Generally speaking, most home sellers and real estate agents are not accustomed to using "other than traditional" financing techniques, so I figured today would be a great day to follow-up yesterday's widely read blog on Distress Home Sales by covering the use of these special methods for selling homes.
Yesterday we were able to show how many homes that sold in the past were distressed sales, so today we wanted to parallel that and show how many homes sold in the past through creative financing techniques. Unfortunately, there is no real data source for that, but I can graph the percentage of homes sold in the past which offered some sort of special financing options. Whether or not those options were utilized is not recorded with the sales data.
Home Sellers Who Offered Creative Financing To Homebuyers
When I first saw the data graphed above, I was surprised. I had assumed that each year (since the market started to tumble) we would see an increase in creatively financed homes in Tallahassee. Instead, we see both the absolute and relative amount of home sellers offering creative financing is dropping. After some review, I think there are three key reasons why this is occurring.
- More distress homes are being purchased, so owner financing is not possible - When a home owner sells their home through short sale, they have no equity to offer towards owner financing. Similarly, bank owned homes and corporately held homes have not yet been offered in this light.
- New mortgage programs requires "skin in the game" by borrowers, meaning most new home loans still require cash equity from homebuyers, thus negating much of the benefit of secondary owner financing.
- Fewer experienced agents are in the market, thus these techniques are not as well known. Most real estate agents have been in the market fewer than five years, thus they have not been exposed to "normal" market conditions that require the use of real estate creative financing skills.
Homes For Sale In Tallahassee Offering Creative Financing
One of the lists that we currently maintain is the list of homes for sale in Tallahassee that offer creative financing. As of this writing (9/28/2010), there are 267 homes on the list, which reflects about 15% of the homes for sale in Tallahassee.
More homeowners should have their homes on this list. If you need to sell a home in Tallahassee, and you are not on this list, you most likely do not understand how important it is (or how easy it is to do). More people can buy your home when some level of creative financing is offered than can without it at all. Get on the list!
Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.