Selling a house in the current market is pretty tough, but with creative financing, this process can be quickened up. It takes you out of the usual financing schemes that most buyers get involved in and brings in more potential buyers to the table, closes deals faster, and grants better terms. We will look at some of the best creative financing strategies and how they may be able to help you sell your house quickly in this guide.
What is Creative Financing?
Creative financing means non-traditional structures used to make real estate deals happen. This means that sellers can just as easily achieve a sale through creative financial structuring as the buyer, without relying on conventional bank financing. This is especially helpful when the buyer cannot secure a traditional mortgage or the seller needs to close the sale quickly.
- Seller Financing (Owner Financing)
What it is:
In seller financing, the seller lends money. He allows the buyer to pay him the amount in monthly instalments. The buyer pays a seller directly instead of going to the bank over a fixed period with an agreed-upon rate of interest.
Why it works
Seller financing opens up a pool of potential buyers more, especially for buyers who cannot quite get a classic loan. This will make the sale of your home hasten because it becomes highly accessible to diverse sellers with different financial backgrounds.
How it aids in quickening the selling of your house
More buyers with the inclusion of even those otherwise not qualified for a traditional mortgage.
Offers flexible terms and increases the marketability of your property especially in a competitive market.
Gives shortening of closing period as buyers opt not to prolong processing in the bank
- Lease Option (Rent-to-Own)
What it is:
A lease option is that type of agreement where the buyer would lease the property for a particular term, by means of option to purchase the home at the end of the term. During the lease term, the buyer can also use a portion of the rent paid toward the down payment.
Why it works:
Lease options can unlock the opportunity to move into a home immediately for buyers who require a little extra time to either save for a down payment or enhance their credit.
As the seller, you are experiencing consistent cash flow and a potential future sale.
How it makes you sell faster:
It attracts buyers who are not yet ready to buy immediately but wish to lock in a home.
Reduces carrying costs (mortgage, maintenance, taxes) to sale.
Increases the commitment of the buyer, since he has an equity stake in eventually buying the house.
- Contract for Deed (Installment Sale)
What is it:
With a contract for deed, a person purchases property by paying money directly to the seller in increments of time while in possession of the property, and the seller retains the deed until all the money or price for the property is paid. The bottom line is that upon full repayment of the contract, title transfers.
Why it works
This kind of structure is also helpful in cases where there is a tight credit market or where consumers are unable to finance themselves through other lines of credit. It is also beneficial for sellers who prefer a steady income flow over the passage of time, rather than one-time cash payment.
How it helps you to sell faster
It gives an option for financing to the buyer, so they do not face difficulty in accessing traditional loans.
Closure is faster compared to traditional home sales.
Appeals to investors or buyers looking for room to maneuver in their financial deals.
- Assumable Mortgage
What it is:
Assumable mortgage whereby the buyer can assume the seller’s outstanding mortgage. This means that the original deal terms and interest rate applied will be retained by the buyer. Such a setup is extremely appealing in markets where the prevailing interest rates are at higher rates than what the seller is tied to.
Why this works:
Buyers get better interest rates than they would have otherwise, and sellers can close deals more quickly, especially in a rising-rate environment. It’s a win-win for both parties.
How it helps you sell faster:
Draws buyers looking for lower interest rates.
Streamlines the financing process to get it closed quicker.
Makes your home more competitive in a rising-rate environment.
- Subject-To Financing
What it is:
Subject-to financing occurs when the buyer steps into the seller’s shoes and becomes responsible for paying off the existing mortgage payments. However, the loan remains under the seller’s name. This allows the buyer to own the property without having to conduct the traditional process involving a lender.
Why it works
For sellers with a low-interest mortgage, sub-to financing is very attractive to buyers who would otherwise like to avoid the high rates on new loans. It may also be well-suited for sellers who wish to sell out of a property quickly.
How it helps you sell faster:
It provides a fast exit from the negotiations by staying at a minimum level of negotiation. It helps those buyers who would not qualify for a new mortgage but may be approved to take over an existing loan.
It reduces the time on the market, especially if the loan terms presented by the seller are highly attractive.
Benefits of Creative Financing
Creative financing can be a real game changer for selling your home quickly. It would attract those sorts of buyers who can get the property, make them feel that urgency is really needed and thus would close deals faster. Moreover, this way of financing also retains control over the process of sale and can even generate better terms if sold traditionally.
Selling a home does not have to be drawn out and agonizing. With creative financing by seller financing, lease options, and contract for deed, you are likely to reach more buyers and close deals faster. If you want to sell your house quickly and efficiently, look into these options to see what best fits your situation.
Are you ready to sell your home quickly using creative financing? Get in touch with Smart Creative Finance today.
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