Pinetop White Mountain Blog

Good Afternoon Everyone,

I was talking to a seller today about the possibility of listing their property and we got in to a discussion about a Seller Carry for a buyer.  At first this seller was opposed to the idea stating that he didn't want to get himself in the same fix as the banks.  After we talked a while though he saw that it might be a possibility.  

There are a lot of potential buyers in the marketplace today who have good incomes, steady jobs, and money in the bank.  Unfortunately they are not qualified for a traditional mortgage because they are self employed.  Business people, particularly owners of Mom & Pop type operations, write a lot of their business income off at the end of the year in the form of expenses.  As a result their net incomes on their tax returns are not as high as they would be if they were drawing wages from a regular job.  The tax benefits of being self employed are very appealing, but they hurt when a business owner applies for a loan. 

A few years ago Business Owners could do what was referred to as a Stated Income Loan.  That means that lending underwriters used something other than traditional W-2's and tax returns to verify income.  In today's market those loans have disappeared.  Banks and Mortgage companies are so afraid to lend because some of those loans have turned sour, just as many other loans have.  However, if they really looked at the statistics, they would probably find that some of those Stated Income loans have performed far better than many others where the buyers qualified under conventional means.

The point of this post is to help you understand that there are many potential buyers in the marketplace right now who have no choice but to find a seller who will carry their note.  Stated Income loans will come back once this firestorm of foreclosures slows, but it may be several years before that happens.  In the interim, buyers who are otherwise qualified to buy cannot because they cannot prove income to the lender's satisfaction.

A Seller who's property is free and clear and who doesn't need to get all their capital out of the property might be in a good position to act as the bank on a sale.  They would be assured a significant down payment and a monthly income for the life of the loan.  In the worst case scenario and the Buyer did default, they would simply foreclose the same as a bank might and resell the property.  The difference would be that they had a significant amount of cash on the front side of the transaction and they don't have to worry about paying off another mortgage holder. 

If you are trying to sell and you don't have a mortgage or note against your property, consult with an Attorney and a Tax Professional and see if a Seller Carry might be an option for you.  There are buyers out there who would love to buy but can't in today's tight lending market.  Many are very good risks otherwise. 

Something for you to think about anyway.  If you would like to know more, give me a call.  I'm standing by.

Thanks for reading.

SANDRA PAULOW, ASSOCIATE BROKER, GRI, SFR  (928) 242-0300

Your High Country Connection for Real Estate!