Re: lol. Good points by both of you. BUT - Posted by David Butler
Posted by David Butler on January 16, 2001 at 19:09:58:
You are certainly welcome, but you still are missing the point just a bit. I am glad Mike stepped in to follow up with my original post, and he made good points as well… but as we both intimated, OWNER FINANCING is not a panacea. I have often quizzed people right here on these boards as to why they are coming up with some complicated deal just to work owner financing into the mix.
And looking at your reply here, it seems as though you anwsered a great deal of your own basic question. In the scenarios you are describing here, why would you offer owner financing, even if you could get par pricing for the paper? Seems like a waste of time, in light of the circumstances you describe. Buy the homes, rehab the homes, sell the homes… buyers are lined up with all the financing they need, you are getting your price, that price is in the market range for your properties - what else is there!!!
Seller financing is just one more tool in the bag - and no need to use it if something else works better for your principals… so long as the deal goes to bed! (Same thing with 1031 exchanges, lease-options, etc). And of course, it is much better than trying to force private financing, where none is necessary. In all honesty, the circumstances dictate the deal.
If you are selling those properties under the conditions you describe, it means that there is sufficient funding available in the institutional lending pipelines, and plenty of qualified buyers to go around (who also have no special needs or circumstances they need to address)… in which case, who cares, right?!?
But… is this truly the case? Are you truly getting qualified buyers calling on all of your listings? Are all of your listings being sold within the listing period? Is the average selling time of your listings commensurate with the market average throughout and is it an acceptable market time (i.e. less than six months?). Are your properties selling within the average sales price/listed price ratio for your market?
If you can answer “NO!” to any of these questions, the probability is very, very high that you have some real opportunity there to boost your closings through the understanding and use of alternative financing techniques.
A second part of that equation - table-funded deals (aka simultaneous closings) are but one form of using paper, and utilizing seller carryback financing. They are a specialized niche, with some mechanics, and higher risk factors… IN MOST CASES (a proven risk factor after the bloodbath the major funders have taken in this area over the past 18 months).
The primary attraction with this ONE particular paper technique, is to bring cash to a deal where cash is the determining factor… and, in most cases, where cash is difficult to come by, or creates a particular situation that does not satisfy a buyer’s objectives for one reason or another. (But again, if you have buyers lined up… who needs this guy, right? Let him offer his paper deal to somebody else.)
And the possible situations can offer a multitude of variations. One of the problems with these boards is that people want to find a “one-size fits all” answers, and in both real estate and finance, it’s not pure cookie-cutter. I have written an awful lot of conventional, government, and subprime loans over the past 23 years… and with the exception of the the “streamline” refinance programs, I rarely had a deal where we didn’t have to do some kind of tap-dancing to get things closed up.
By the way… although it is not written in firm policy, in my experience with government and conventional programs, it is almost impossible to push through a loan with less than a 620 credit score. And I have had many occasions where we have had to run folks with even 680 and 700 scores, through subprime programs due to nonconforming elements related either to the property, or the borrower’s employment histories, credit irregularities, or insufficient down payments.
Indeed, as I have discussed at some length in our FREE report, THE COMPLETE GUIDE TO UNDERSTANDING CREDIT RATINGS AND CREDIT REPORTS, at: http://notenetwork.com/at.cgi?a=118510&e=Reports/Complete.Guide.php3
we discuss to some degree the fact that in mortgage lending, the underwriting process is not score-driven, so much as it is “profile” driven. It is worth noting here too, that a 600 credit score is not considered “good” by most standards (although admittedly, we like to see that in a subprime application).
Some good ground in this area offers direct pointed discussion with regard to your last few paragraphs here, and can be found right down below at: http://www.creonline.com/cashflow/wwwboard3/messages/8926.html
More food for thought… we’ll see what else comes here in a bit