Homes Everyday

Is Real Estate Investing for You?

2010-02-08T08:00:00.003-05:00

So you want to know if the real estate investment game is for you. How to get started? Where to invest? Why? Do you need a lot of money? Is it risky? Do you need great credit? A ton of knowledge? Do you need to spend thousands on courses and seminars? And on and on and on the questions go!

Real Estate for Beginners

Part of the mission of this Real Estate site is to offer advice to those just getting started, but also for those who haven't had much success, and those looking for less risky methods of investing. Even if you're a seasoned pro with your own Flipping Houses show you will find useful information on a variety of other topics like "Rent to Own", "Options", "Cooperative Assignments", "Subject To", "Contract for Deed", "Real Estate Websites", "Toll-Free Numbers", "Buying Homes", "Commercial Property", "Creative Financing", and a host of related topics.

If you've been researching real estate investing for more than 5 minutes you are no doubt feeling a tiny bit overwhelmed with the mountain of information on every aspect of the business. There's a lot of conflicting information and ideas and if you're studying online then you also know all this investment info is spread far and wide across many forums, blogs, sites, and whatnot. There's a ton of useless crap that won't get you anywhere. And then there's the sales pitches for the $10,000 bootcamps and the $1,500 50-DVD courses that promise to teach you everything you need to know to make millions in real estate your first week.

Right...

What I'm hoping to do with this blog is cut through as much of the junk as possible and give you just what works. It's all free for the taking so enjoy! I am personally in love with low risk (or no risk) investment techniques that don't require money or credit or partners to get started. Why? Because a) investing your own money is risky, b) using your own credit is limited, and c) finding partners when you're new isn't exactly easy, plus you'll feel pretty bad when you lose their money because you didn't really know what you were doing when you bought that handyman special with the swampy backyard.

There's no need to get into high risk-high reward investments right now anyway. Do you really need to try to make $100,000 on your first real estate deal? Would you be happy with a quick thousand or two to get your feet wet? Sure you would. And that's exactly what you'll find here. Simple to understand, easy-to-use, ready-to-implement real estate tips and tricks that even a total novice can put to use right away.

OK, so let's talk a bit about deciding if real estate investing is even something you want to get involved with. There are pros and cons to consider and it does take effort and time so if you're already working yourself to death and have no time for your life or your family then maybe real estate isn't for you. If you can't stand any risk at all investing of any kind probably isn't a great idea either.

But chances are if you're reading this then you have a strong entrepreneurial spirit, some time, maybe even some money or credit (although you don't need them to buy property, they certainly can't hurt). I'm sure you've been reading lots of articles and forum posts and blogs before arriving here, if not maybe you have some preconceived ideas about real estate. The fact is I've been around long enough to have seen new investors come and go all over the internet. A few from each 'generation' (a generation online is like 1 year, maybe less) succeed and build great real estate businesses, while the rest ask a lot of questions and do a lot of research, but never make any money. Eventually they give up and are replaced with a new group of newbie investor wannabes who ask the same questions and do the same studying all over again.

It's my goal to help you get passed the studying phase and into action as quickly as possible with enough real estate know-how and the right tools to start making money. Because the only way you're going to stick with it and become one of the success stories is by bringing home a nice cheque (paycheck for my American readers) to show your spouse, children, or just to frame on the wall of your home office.

Speaking of a home office. You're going to need one if you expect to take this investing in real estate adventure seriously. You don't actually need to set aside a separate room (if you can that would be good though) it can just be your computer desk in the corner, but while you're working, it's your real estate entrepreneur support station, don't forget that! You'll need a phone, computer, and internet access (I suppose you already have that since you're reading this? duh!)

Things you don't need to get started in real estate as a business: Business cards, a company name, an LLC, a toll-free number, a domain name, a professionally designed website, a graduation badge from some $25,000 seminar, a shelf full of real estate courses, a ton of money, an 850 credit score, or any of that other nonsense!

You do need to be able to find and contact people who are buying and selling property (thus the phone and internet). You need a solid understanding of at least one basic investment technique (that's what I'm here for!) and you need the right contracts to go along with that technique. That's it! Really! All the other stuff is just a waste of time and money at this point. You can operate under your own name for now. Until you start making money you don't need to worry about taxes or corporations or establishing an internet presence. The real estate business is about connecting with as many buyers and sellers as possible on a personal level, in person if at all possible, but the phone and internet work too.

The point is...you can get started with much less than you imagine. I completed my first real estate deal before I'd read a single course and I had to write my own contract! (NOT something I recommend, I was lucky I didn't get sued!) If you're like most newbies...which you aren't since you've read this loooong post...you're probably wondering about, if not actually posting questions on forums, along these lines:

"Should I set up my real estate LLC and website before I call my first seller?"

Answer: NO!

"Should I get 1,000 business cards printed or do I need 5,000? Color? Glossy?"

Answer: NO!

"Will 500 'We Buy Houses' signs be enough to bring in calls? When's the best time to nail them to telephone poles?"

Answer: When you're least likely to get arrested.

"I have a 3 inch thick stack of listings from my realtor..."

Answer: Stop right there!

And the granddaddy of them all:

"Do I need my real estate license to invest?"

Answer: NO!

All you really need is a little guidance and a willingness to take action. You'll get the first part here, but only you can bring the action.

Lease Purchase Benefits for Sellers and Buyers

2010-02-06T10:32:00.000-05:00

Lease purchase agreements are commonly offered by sellers of hard-to-sell properties. Think about it, if the property was easy to sell, the seller would sell it to a conventional buyer who would pay the seller cash.

Sellers generally get market value at today's prices and relief from paying a mortgage on a vacant property.
Although the lease payments may exceed market rent, the buyer is building a down payment and banking that the property will appreciate beyond the agreed upon purchase price.
Buyers generally make a small down payment, with little or no qualifying, making a lease purchase an attractive way to ease into the benefits of home ownership.
Buyers also receive a forced savings plan since part of the lease payment is credited toward the purchase price at the end of the lease option agreement.
If the buyer defaults, sellers do not refund any portion of the lease payments nor the option money and may retain the right to sue for specific performance.

Source

20 Things you Need to Be a Successful Investor

2010-02-05T09:00:00.007-05:00

What does it take to be a successful real estate investor? Well here's a quick list of some of the skills that will take you far!

Detail-oriented
A quick learner
Excellent interpersonal skills
Ability to self-manage (time, resources etc.)
Apply what you learn
Good negotiation skills
Passion for real estate
Desire to help others
Have an investment plan
Master your niche
Ask for help
Build a team
Network
Have a mentor
Listen to the market
Always be learning
Focus on marketing
Understand buyers and sellers
Give people what they want
Never give up

Doing a Lease Option / Lease Purchase

2010-02-04T10:30:00.001-05:00

Hire a real estate lawyer to draw the documents and explain your rights, including those of possession and default consequences. The property might be encumbered by underlying loans that contain alienation clauses, giving the lender the right to accelerate the loans upon sale.

Sometimes sellers give the option money to their real estate agent as full payment of commission. Agents are not always involved in the exercise of lease options or fulfillment of lease purchase agreements and, even if you have retained real estate agent representation, you still need a real estate lawyer. Agents are not lawyers and cannot give legal advice.
In the event of a lease purchase, obtain all the disclosures and do your due diligence just like you would on a regular sale. This means:

Get a home inspection.
Examine the title policy.
Obtain an appraisal.
Read seller disclosures.
Consider obtaining pest inspections, a roof certification, home warranty plan and hiring other qualified inspectors.

Source

Basics of a Lease Purchase

2010-02-03T10:29:00.002-05:00

Buyer pays the seller option money for the right to later purchase the property. This option money may be substantial.
Buyer and seller agree on a purchase price, often at or a bit higher than market value.
During the term of the option, the buyer agrees to lease the property from the seller for a predetermined rental amount.
The term of the lease purchase agreement is negotiable, but the common length is generally from one year to three years, at which time the buyer applies for bank financing and pays the seller in full.
The option money generally does not apply toward the down payment.
A portion of the monthly lease payment typically applies toward the purchase price.
Option money is nonrefundable.
Nobody else can buy the property unless the buyer defaults.
The buyer typically cannot assign the lease purchase agreement without seller approval.
Buyers are often responsible for maintaining the property and paying all expenses associated with its upkeep, including taxes and insurance.
The buyer is obligated to buy the property.

Source

Basics of a Lease Option

2010-02-02T10:28:00.000-05:00

Buyer pays the seller option money for the right to later purchase the property. The lease option money may be substantial.
Buyer and seller may agree to a purchase price now or the buyer may agree to pay market value at the time the option is exercised. It is negotiable. However, most buyers want to lock in the future purchase price upon inception of the lease option.
During the term of the lease option, the buyer agrees to lease the property from the seller for a predetermined rental amount.
The term of the lease option agreement is negotiable, but the common length is generally from one year to three years.
The option money generally does not apply toward the down payment.
A portion of the monthly rental payment typically applies toward the purchase price.
Option money is rarely refundable.
Nobody else can buy the property during the lease option period.
The buyer generally cannot assign the lease option without seller approval.
If the buyer does not exercise the lease option and purchase the property at the end of the lease option, the option expires.
The buyer is not obligated to buy the property.

Source

How I Made $4,750 by Solving 2 Problems

2010-02-01T09:00:00.001-05:00

Would you like to know about a real estate investing technique that’s simple to learn, works in all market conditions, costs next to nothing to use, and has virtually zero risk? Too good to be true? Here’s the catch: You’re not going to get rich off of one deal. Still interested?

The Cooperative Assignment (CA for short) is gaining ground as the tool of choice for many full-time investors and at the same time is recognized as a great way for beginners to get started.

So what is it?
A CA is where you take a Lease Option, Contract for Deed, or some other form of Owner Financing contract, write the terms to be attractive to both buyer and seller, and then market it and assign it to a buyer for an instant cash profit.

A CA turns you into a consultant who uses their knowledge of terms and marketing to bring buyers and sellers together in a win-win deal. It allows buyers to get into a house faster, cheaper and easier, and gives sellers the chance to move on with their lives while making extra money from the sale of their property.

Things You Need
There are a few things you need to do a CA smoothly.

‘Terms’ paperwork. You can use a Lease and Option, a Contract for Deed, or anything similiar.
Yard signs and directional signs to draw attention to the house.
Voicemail so you can describe the house and terms ONCE instead of 100 times to 100 different buyers.
Website to showcase the house (recommended but optional).

Things You DO NOT Need
For reference, and maybe a little inspiration, here’s a list of things you DON’T need:

Lots of money ($50 should do it)
Good credit
A job
A real estate license
Fix-up skills
Repair estimate skills

Now I bet you’re curious what a CA looks like on paper, right? Here’s one of mine so you can see how it worked out for everyone involved:

After calling several FSBOs from the paper I came across Mr. S. who had a 3 bedroom, 1.5 bath, 1-car garage townhouse for sale for $142,900. He had already bought another house and needed this one sold or rented within 60 days. In 9 days I found a family eager to own their own home but needed some extra time to get their credit in shape to get a mortgage. 14 days later the deal was closed and I had my profit.

The Seller
$149,900 sale price, $300/month positive cash flow plus mortgage reduction and tax deductions, and pays no commission or closing costs.

The Buyer
Got out of their basement apartment and into a move-in condition townhouse with all the trimmings without the hassle of dealing with the bank or a realtor.

The Investor
For an investment of about $40 and 10 hours of my time, I made $4,750 cash profit in 3 weeks.

Basics of an Option

2010-01-31T10:25:00.001-05:00

Buyer pays the seller option money for the right to later purchase the property. This option money may be substantial or as little as $1.
Buyer and seller may agree to a purchase price now or the buyer may agree to pay market value at the time the option is exercised. It is negotiable. However, most buyers want to lock in the future purchase price upon inception of the option.
The term of the option agreement is negotiable, but the common length is generally from one year to three years.
Option money is rarely refundable.
Nobody else can buy the property during the option period.
The buyer can sell the option to somebody else.
If the buyer does not exercise the option and purchase the property at the end of the option, the option expires.
The buyer is not obligated to buy the property.

Source

Lease Options

2010-01-30T10:25:00.000-05:00

Lease option sales were popular financing instruments in the late 1970s and early 1980s. They were primarily used as a way to circumvent alienation clauses in mortgages. Proponents claimed the sale was not really a sale because it was a lease; however, courts argued otherwise.

Today, options to purchase, lease options and lease purchase agreements are three different financing documents. The variances are state specific and not all states have identical laws. Before entering into an agreement with a seller, buyers should obtain the advice of a real estate lawyer. The information below is an overview and is not meant to be construed as legal advice.

Source

How to Work with a Realtor on a Non-Exclusive Deal - Part 3

2010-01-29T09:00:00.002-05:00

< Back to Part 1

The Dreaded Commission

The first thing that comes to the mind of most investors is what they’re going to do about the broker’s commission. Who is responsible for paying it? How is it going to get paid? When is it going to be paid? Does it still have to be paid if you find a buyer or buy the property yourself?

At the time that I’m writing this there was recently a question raised on one of the real estate forums asking how the investor should go about paying the brokers commission. In fact that post is the inspiration for this article. I wanted to help anyone facing a similiar situation because this does come up from time to time when doing a lot of non-exclusive deals.

Take a minute and think about the situation, what has changed? You still have an option to buy the property. The price on your contract hasn’t changed, has it? No. Have any of the other terms changed like the length of time you have to close or assign the contract? No. And most importantly, did you sign a listing contract agreeing to pay the broker a commission? No. So the only thing that’s changed is you have some competition. With that in mind let’s go over those panic-induced questions again.

Q: Who is responsible for paying the commission?
A: The person who signed the listing (the seller).

Q: How is it going to be paid?
A: From the seller’s proceeds of the sale.

Q: When is it going to be paid?
A: At closing.

Q: Does it still have to be paid if you find the buyer or close the deal yourself?
A: If you were excluded from the listing, then the answer would be no. If you weren’t excluded then it’s a bit of a gray area. The argument could easily be made that since you had a contract before the broker did and you were responsible for the sale that no commission should be due. But that’s entirely up to the seller and whether they want to fight the broker. It doesn’t effect you at all.

An Interesting Twist

What if your contract is for the amount the seller owes? Strictly speaking, since the seller is responsible for the commission, they would have to produce it from their own pocket instead of from the sale of the property no matter how much money you make on the sale. That’s a raw deal for the seller but a bed they made for themselves. However, this could be an opportunity for you to build goodwill and have both the seller and the broker owe you one. If your profit is significant enough (don’t give away your livelihood) and you’re feeling generous, you could offer to give the seller enough money to pay the commission. Just remember that you are in no way obligated to pay anything. All parties involved should be 100% clear that you’re doing this out of the goodness of your heart and that you will collect the favour sometime down the road.

How to Work with a Realtor on a Non-Exclusive Deal - Part 2

2010-01-27T09:00:00.003-05:00

< Back to Part 1

Marketing Strategy

Foremost: Always remember that because of the nature of non-exclusive real estate deals, they could wither on the vine at any moment. So you must carefully budget both the time and the money you choose to invest in each deal. My personal preference is to rely on free and inexpensive marketing techniques and to do everything in my power to limit the amount of time I spend on both marketing and showing the property.

What do I mean by “free and inexpensive”?

FREE

Free online classifieds
Email blast to your existing buyer list
Word-of-mouth within your network
Open houses
Finders fees (I place this in the “free” column because you only pay the fee out of your profit, so it only costs something if it works)

INEXPENSIVE

Yard sign
Directional signs
Flyers at the property and in the area around it

As long as you remember to keep your upfront costs down to a minimum you won’t be hurt too much if the unexpected happens (like the seller successfully selling on their own, or listing it with a broker). So now let’s discuss what to do if the unthinkable happens, the seller lists the property and you have to deal with a Realtor mucking around on your turf!

Rent to Own Barns

2010-01-26T19:52:00.001-05:00

Can you rent to own a barn? Sure you can! And this can be a surprisingly profitable venture. Storage barns, horse barns, etc. can be acquired on a master rent to own agreement and subleased to individual tenants creating cash flow for you.

Example: A friend has an insulated storage barn that would be perfect for renting space to people who want to store their cars over the winter. But he doesn't want to deal with finding and making agreements with all those tenants, so you offer to rent to own the whole barn and take care of everything else in exchange for a discounted rent. You then locate and make agreements with all the tenants at full market rent. The difference is your profit.

What You Need

A Master Rent to Own Agreement to sign with the owner
A Sublease Rent to Own Agreement to sign with each tenant
Someone with a barn who's willing to rent the whole thing to you at a good price
Tenants with a need for storage

The exact same rent to own procedure can be done with any kind of barn, shed, gargage or other large industrial-type building. And the profits can be quite nice. Say you rent to own a barn that can store 20 cars. In many parts of North America it would cost at least $50 a month for the tenant to store their car there over the winter. $50 x 6 months x 20 tenants = $6,000. If you pay $500 a month for the barn then you will make $3,000 each winter from just one single barn.

The possibilities are endless. Just let your creative juices flow and think what YOU could do in the rent to own barns niche!

How to Work with a Realtor on a Non-Exclusive Deal - Part 1

2010-01-25T08:00:00.008-05:00

At some point during your real estate investing career you may wind up in a situation where you have a property under contract on non-exclusive terms and the seller will decide to hire a real estate broker. You need not panic, after all the door was left open for the seller to do that because of the non-exclusive nature of your agreement (typically an option). There are several things you need to keep in mind when dealing with this situation in particular and non-exclusive deals in general.

What I mean by Non-Exclusive

First, let’s make sure we’re on the same page about what exactly we mean by “non-exclusive”. When using an option to purchase agreement for example, you have the right (but not the obligation) to purchase the property within a certain period of time for a fixed price and terms. This often elicits some nervousness on the part of the seller because the deal is unilateral, that is to say, they’re bound by the agreement while you are not. Smart investors will remedy this situation by offering to make the agreement “non-exclusive” meaning that the seller can accept another offer under certain conditions.

The advantage of this is that the deal becomes a “no brainer” for the seller because he/she can continue trying to sell on their own or hire a broker at the same time that you’re working to close the deal or assign your option. The risk is of course that they may decide to actually make use of their rights! That can easily put you in a difficult spot if you didn’t take that possibility into consideration when making your plans for the property.

Now let’s talk about some precautions you need to consider and implement in your overall investing strategy to protect yourself before any deal goes off the tracks.

Pros and Cons of Investing in Real Estate with a License

2010-01-22T06:00:00.001-05:00

This is probably the single most asked--over asked--question by would be investors. And the short answer is: No.

There are pros and cons to consider depending on your preferred method of investing so let's consider a few...

Pro - Commission
Obviously the biggest benefit to being an agent is that you can charge a commission for your services. This opens up another avenue to getting paid because in most jurisdictions as a non-licensed investor you can't legally charge a fee to broker real estate on someone else's behalf. As an agent you can put on your principal hat, or you broker hat, depending on the deal. While a non-licensed investor must always be a principal in every transaction.

Con - Disclosure
As an agent you must disclose that you have a license to all parties at all times. If you buy a lot of houses from FSBOs this can be a problem as they are called by other agent's non-stop from the moment they plant their sign, and many of them are pretty upset at agents in general. You must also be very careful to ensure that everyone understands exactly when you are acting as an agent, and when you are acting as a principal.

Pro - MLS
The MLS is a goldmine of information including everything from how long homes are taking to sell, to getting a very good idea what a prospective deal might be worth.

Con - Code of Ethics
Touted as a protection for the public, the CoE is really there to protect brokers from one another. As a non-licensed investor you can legally and ethically contact the owners of broker-listed property directly and cut a deal that does not involve the broker/agent at all. If you do that as a licensed agent you will most likely not have your license for very long.

Pro - Listing
As an investor you will see countless marginal deals cross your desk that are more or less useless to you as an investor. But if you have your license you can take the deal as a listing and hope another agent sells it for you. Minimal effort to create another stream of income.

Con - Splits and Dues
There's really no way around it. One way or another you have to pay the piper. Either you split part of your commission with your broker, or you pay desk fees. There are a few very low-cost virtual brokerages that let you hang your license with them for a nominal fee which is a good alternative to the expensive franchises. But even if you are a broker yourself you still have to pay for MLS access, Realtor dues, and mandatory ongoing education fees.

Pro - Professionalism
While FSBOs may not like agents, many people do view agents as professionals and accord them far more initial trust than any private investor could hope to receive.

Con - Regulation
There's a not-insignificant set of rules which only brokers/agents are required to follow. These effect everything from marketing material to conduct. You must know where the line is to ensure you don't lose your license.

So there you have it, some of the pros and cons to a being licensed vs. non-licensed investor. Granted there are ways around most of the cons for agents and likewise there are ways to gain most of the benefits as an investor. The benefits and drawbacks are reasonably balanced so getting licensed is very much a personal choice and will depend a lot on how you do business and where most of your leads come from.

Selling Your Home on a Lease Option

2010-01-21T06:00:00.002-05:00

A common question these days with the recession, falling house prices, and long waits to sell that sellers all over the world—never mind just locally—have to contend with, is whether or not a lease option (aka lease purchase, rent to own, lease to own) will help them sell faster and for a better price?

The answer is...it depends.

Selling your home on a lease option certainly does make most homes and other properties more attractive to a larger number of potential buyers. And that can translate into a better price and a faster sale. But you have to be realistic. The good news is that if you are then you can beat out all of your competition even if you're house isn't a picture out of a homes magazine.

Let's consider a few things that will help:

Set a reasonable price. You can't expect to get 2007 prices in 2009 when the average price has dropped anywhere between 15 and 50% in that time. But you can expect some (even if its small) premium over today's price because of the value of time and convenience you're offering to your buyer.
Ask for a reasonable down payment. Again you can't go crazy here like some sellers when they try to collect 10%, 20% or more from their lease option buyers. Ask yourself whether YOU would be willing to risk losing the amount you're asking your buyer to put down if you were in their shoes? At the same time, don't give your home away like it's a regular rental otherwise you won't attract lease option buyers you'll just attract regular renters.
Make your home presentable. It doesn't have to be perfect but please... make sure it's clean, tidy, devoid of nasty smells, and doesn't look like it's been left to the dogs when potential lease option buyers pull up!
Hire competent legal advice. A good real estate attorney or title company are worth more than their weight in gold. Find someone who's familiar with the lease option paperwork and process.
Work with a Lease Option Consultant. I admit I'm a biased source for this tip. But if I didn't honestly believe it was a good idea to work with someone with years of expertise in the ins and outs of lease option transactions, I wouldn't do it for a living. Besides, it doesn't cost you a cent to put our knowledge to use so what have you got to lose?

So the answer to the question “Should I Sell My Home on a Lease Option” is...yes! If you can wait a year for your money you will walk away with a lot more cash in your pocket then if you try to sell the traditional way.

Rebuilding Credit after Bankruptcy

2010-01-20T06:00:00.002-05:00

Once your bankruptcy is discharged it's critical to begin rebuilding your credit as quickly as possible. Improving credit will not only reduce your interest rates but it's required in order to get a mortgage especially with today's new stricter lending guidelines. The good news is that even though a bankruptcy will remain on your credit file for up to 7 years it's possible to get a mortgage much sooner. There are some lenders who will give you a mortgage within 6 - 12 months but the interest rate won't be very attractive and you will be required to come up with a larger down payment. However you can usually qualify for a mortgage with a good interest rate and normal down payment within 2 years. The key is to get started right away and work deligently towards your ultimate goal of home ownership.

Here are the steps you should take to rebuild your credit:

After discharge check your credit report with both of the major credit bureaus and verify that there are no errors.
Talk to your bank and let them know that you want to re-establish your credit rating.
If you don't already have one; open a savings account and begin saving at least 5% of your income every month.
Apply for a secured Visa or MasterCard from your bank. A secured credit card means that you deposit money either into a special account or your bank will "freeze" a certain amount in your savings or chequing account. This money is used to secure any purchases you make on your credit card.
Charge items to your secure card and pay them off completely every month. As each month passes your credit rating gets better and better.
In 3 - 6 months apply for a seperate unsecured credit card, either from your bank or another one.
Another 3 months of on-time payments and you can apply to have your secure card replaced with a second unsecured card.
At around the 12-18 month mark apply for a car loan, car lease, or another line of credit from a bank. This is the third and final credit account most banks look for when considering you for a mortgage.
Finally at the 24 month mark it's time to review everything and apply for your home loan!

Always Remember: During these 2 years it is absolutely vital that you never make a late payment

Basics of the Agreement for Sale Part 3

2010-01-19T12:43:00.007-05:00

< Back to Part 1

Advantages for the Buyer

Now that we've discussed all the benefits to the Seller, what about the Buyer, why are Buyer's the world over so eager to purchase their next home this way?

* Easy Qualification *
The Buyer often prefers an Agreement for Sale because it doesn't come with the same income and credit approval that a bank may require. The buyer may have poor credit due to a divorce or bankruptcy. They may have never gotten around to establishing much of a credit history or lived in Canada for a short time. The buyer may be self-employed or have a commission-based income making it difficult to qualify. Or they may be new to their job and unable to meet strict bank guidelines. Even if the buyer can qualify for a loan the interest rate may be too high to make sense to buy that way. There are dozens of reasons why a buyer cannot or chooses not to get a traditional mortgage. The Agreement for Sale becomes the perfect solution.

* Credit Rating and Eventual Purchase *
An Agreement for Sale may offer the buyer a chance to improve their credit. Also living in the home they intend to buy with at least 12 on-time monthly payments makes it much easier to qualify for a mortgage when the time comes.

* Huge Savings *
All of the costs associated with a traditional mortgage are either eliminated or deferred. The biggest one being mortgage insurance which costs thousands of dollars and is rolled into your mortgage so you pay interest on it as well!

* Fast Closing *
A buyer can close and move into a property in a matter of days and begin enjoying their new home sooner.

Basics of the Agreement for Sale Part 2

2010-01-19T12:42:00.006-05:00

< Back to Part 1

Benefits for the Seller
If you have a property for sale why would you consider offering owner financing by way of an Agreement for Sale?

* Highest price *
There is no doubt that when you offer "easy" terms you can command top price for your property, often receiving even more than it is currently worth. Buyers have always been willing to pay a premium for easy qualifying financing.

* Fast Closing *
No one wants their property to linger on the market for months on end, unfortunately with the slowing market and abundant competition from other sellers in the same situation, frustrating open houses and offers that fall through are what you face as a seller unless you make your property stand out from the crowd. By offering owner financing by way of an Agreement for Sale you effectively increase demand for your property by orders of magnitude. It's common to be bombarded with dozens even hundreds of calls and emails by eager buyers in need of what you have to offer. An Agreement for Sale can often be consummated within a matter of days.

* Thousands of dollars in Savings *
Many people focus on the sale price of their property rather than the NET cash in their pocket at closing. This mistake can cost you greatly, let's use a common scenario to illustrate:
Let's say you have a house worth about $200,000. If you go the traditional route of listing this home with a real estate agent you won't get anywhere near $200,000.

First, statistically agents reduce the list price at least once by about 5% or in this case $10,000.
Second, again statistics show that agents sell homes for about 95% of their list price on average. In otherwords, another $10,000.
Next, even if you think your home is in perfect shape chances are your buyer's inspection will discover (or invent) repairs to the tune of about 2% or $4,000 in this case. You then have the choice to pay this out of pocket and hope your buyer can close, or reduce your price further.
Finally, the agent collects their commission of another 5 to 6% which for this scenario adds up to another $8,800 to $10,560.

Bonus Cost, don't forget holding costs while you wait 3 to 6 months for a buyer. Mortgage, taxes, insurance and utilities all pile up month after month and drain your pocket of another $5,500 to $11,000.

After it's all said and done you end up putting only $154,440 in your pocket. So much for that hoped for $200,000 payday!

When you sell your property with an Agreement for Sale all of these costs are eliminated. Even if you choose to offer you home at a slightly reduced price of $190,000 to sell it even faster, you still come out ahead by nearly $40,000.

* Safety and Security *
The final benefit of the Agreement for Sale over traditional owner financing is that you retain the deed to the property until you're paid in full. This completely protects you in the event that the buyer is unable to close or must move out early. You don't have to go through any sort of lengthy foreclosure process. The buyer simply hands you the keys and you keep all of the money paid up to that date.

Basics of the Agreement for Sale Part 1

2010-01-19T12:39:00.009-05:00

Basics of the Agreement for Sale Part 1 Introduction
Basics of the Agreement for Sale Part 2 Seller Benefits
Basics of the Agreement for Sale Part 3 Buyer Advantages

Whenever the market slows down and it gets harder to sell homes, the Agreement for Sale enjoys a surge of popularity. That was true in the buyer's markets of the 1970s, 1980s and the 1990s, and it is sure to be the case now as we enter the buyer's market of the 2000s. So what are they? And how can you benefit whether you're looking to sell a home or buy one?

Summary
An Agreement for Sale (AFS) is a type of owner financing where the legal title of the property remains in the seller's name for added security until the purchase price is paid in full. The buyer makes payments directly to the seller normally for a set number of months and then the remaining balance comes due and payable in full. If the buyer is unable to complete the sale at that time, the buyer and seller may agree to an extension or to change to a straight lease or another form of owner financing, failing that the buyer forfeits all monies paid and the property reverts back to the seller.

History
Agreements for Sale actually pre-date mortgages held by banks. A search of the internet has turned up recorded AFS transactions as far back as the mid 1800s for various farms, ranches and other property all across Canada. This type of owner financing was nearly as common as traditional mortgages in the difficult markets caused by oil shortages and high interest rates in the 1970s and '80s. During the past decade with the unprecedented demand for housing the popularity of the AFS has waned however it is still used to help with more difficult sales particularly in rural settings.

About

2010-01-01T11:12:00.004-05:00

Name: Doug Pretorius
Age: 32
Location: Waterloo, Ontario
Occupation: Investor, Publisher, Internet Marketer
Years Online: 20
Years Publishing: 15
Years Investing: 10

About Me
...more to come!

Need to reach me? Use this form:

Privacy Policy

2010-01-01T00:00:00.000-05:00

This website/blog uses third-party advertising companies to serve ads when visiting this site. These third parties may collect and use information (but not your name, address, email address, or telephone number) about your visits to this and other websites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, you can visit Google's Advertising and Privacy page.

If you wish to opt out of Advertising companies tracking and tailoring advertisements to your surfing patterns you may do so at Network Advertising Initiative.

Google uses the Doubleclick DART cookie to serve ads across it's Adsense network and you can get further information regarding the DART cookie at Doubleclick as well as opt out options at Google's Privacy Center

Privacy

I respect your privacy and I am committed to safeguarding your privacy while online at this site homeseveryday.com The following discloses how I gather and disseminate information for this Blog.

RSS Feeds and Email Updates

If a user wishes to subscribe to my RSS Feeds or Email Updates, I ask for contact information such as name and email address. Users may opt-out of these communications at any time. Your personal information will never be sold or given to a third party. (You will never be spammed by me - ever)

Log Files and Stats

Like most blogging platforms I use log files, in this case Statcounter and/or Google Analytics. This stores information such as internet protocol (IP) addresses, browser type, internet service provider (ISP), referring, exit and visited pages, platform used, date/time stamp, track user’s movement in the whole, and gather broad demographic information for aggregate use. IP addresses etc. are not linked to personally identifiable information.

Cookies

A cookie is a piece of data stored on the user’s computer tied to information about the user. This blog doesn't use cookies. However, some of my business partners use cookies on this site (for example - advertisers). I can't access or control these cookies once the advertisers have set them.

Links

This Blog contains links to other sites. Please be aware that I am not responsible for the privacy practices of these other sites. I suggest my users to be aware of this when they leave this blog and to read the privacy statements of each and every site that collects personally identifiable information. This privacy statement applies solely to information collected by this Blog.

Advertisers

I use outside ad companies to display ads on this blog. These ads may contain cookies and are collected by the advertising companies and I do not have access to this information. I work with the following advertising companies: Google Adsense, ROI Rocket, Project Payday. Please check the advertisers websites for respective privacy policies.

Contact Information

If you have any questions or concerns please contact Doug Pretorius at doug (dot) canada (at) gmail (dot) com. This privacy policy updated January 2010.