UTAH REAL ESTATE INVESTOR

Seller financing is extremely powerful because the buyer and the seller have control over all the terms of the transaction. That means that there are virtually unlimited applications for seller financing. However, all of the options for seller financing fall into just a 2 major categories: financing after the closing and financing before the closing.

The following 4 types of financing occur after the closing:

1. Free and Clear Financing – When a seller owns a property “free and clear” there are no liens or encumbrances on the property. In this situation the seller and the buyer are free to make any terms they want to in order to make a deal successful.

2. Equity Only Financing – This type of financing means that the seller only finances their equity in a property. The buyer is responsible for getting new financing to pay-off all of the seller’s encumbrances and liens. The seller is then free to finance the equity in the property.

3. Wrap Financing – This is also known as “subject to” or “blanket” financing. In this situation the buyer takes the property “subject to” the existing mortgage. The buyer is responsible for making mortgage payments to the seller and the seller is responsible for making mortgage payments to the original lender.

4. Combo Seller Financing – This type of financing is a combination of the financing options #2 & #3. The buyer can “wrap” the underlying mortgage and finance the seller’s equity.

The next 4 types of seller financing occur before the closing:

5. Purchase Option – Any time the buyer gives money to the seller (option payment) for the right to purchase the property at a given price (option price) and within a given timeframe (option period) the buyer has a “purchase option”. This is a form of seller financing because the seller still is responsible for the property and any payments until the buyer purchases the property (exercises their option to purchase) or the option expires.

6. Extended Closing – An extended closing is similar to a purchase option except that the extended closing is done with a Real Estate Purchase Contract (REPC). In the extended close the closing deadline is extended or put into the future significantly further than a typical real estate purchase.

7. Open-ended Closing –The open-ended close is also done with the REPC except the closing deadline is tied to a future event (such as the completion of an addition or remodel). The closing only occurs after the future event has occurred or has been completed.

8. Seller Partnerships- In this situation the seller may sell the property or may retain ownership. In either case, the seller contributes the property (and possibly some capital) as their contribution. The buyer would contribute the work and knowledge (and possibly some capital) to create or enhance the property value. The property would then be refinanced by the buyer or sold to a third party. The seller would get his equity and capital contribution plus an agreed partnership split of the additional profits on the transaction.

The great thing about these 8 types of seller financing is that every option can be used to benefit both the buyer and the seller. Using these seller financing options a seller can actually get a buyer to come in and improve their property, do all the fix-up and repair work at the buyer’s expense, and the buyer is excited about doing the work! I’ll explain how this can be in my next article…

One of the most misunderstood topics in real estate is “Seller Financing”. This is probably because the topic of seller financing is usually discussed from the perspective of the buyer. And in most cases the buyer is a beginning investor who is trying to get a “good deal” or they are starting to buy property with “no money down”. But all too frequently the deal falls apart and the stories explode about the problems of seller financing.

It is time to unfold the power of seller financing and the simple secrets and techniques to keeping the transaction a positive experience for everyone. While most people can explain the benefits of seller financing for a buyer what most people don’t understand is that seller financing is actually better for the seller than it is for the buyer. Here are several ways that the seller can benefit from offering seller financing on their property:

1. Timing – The seller has complete control over the timing of the sale when they are offering the financing. The seller can determine just how long it will be before the sale closes. The seller can determine how long they can stay in the house after the sale closes. The seller can determine exactly how long the buyer must pay on the mortgage and when they have to refinance and pay off the loan. And by offering seller financing they can get their home sold more quickly because of the appeal of seller financing to the market in general.

2. Higher Sales Price – Market value is based upon “supply and demand.” Most sellers are not offering seller financing so there is a limited supply but there is a huge demand. As a result, the price of the home in higher than the other comparable homes in the neighborhood. Also, because the traditional costs of mortgages are no longer in the equation you can collect that money too (as much as 3-5% of the value of the home) as part of the sales price.

3. Cash at Closing – There is nothing that says a seller must finance the entire purchase price of the property. The seller can require a down payment which will provide some cash at closing. (There are more advanced way to collect cash at closing which go way beyond a down payment but can still result in a “zero-down” for the buyer.)

4. Payments over Time – When the seller finances the equity in their property, those payments become a steady stream of income for the seller. This becomes a fantastic income stream for someone who may be down-sizing or who does not want their property for any reason (this is especially great on investment properties).

5. High Return on Investment – Considering the equity as an investment, the payments received from seller financing are better than one can expect from a savings account, CD or mutual fund. Even if the interest rate on the seller finance mortgage is small, the principle balance of the investment is larger than the seller could have received through a traditional sale.

6. Difficult Properties Sell Easily – Sellers who have properties that are difficult to sell can sell them with seller financing. Again, the demand for any property increases as more people are qualified to buy them.

7. Collateralization – The seller controls the terms of the mortgage and can require additional collateral to secure the loan. This additional collateral can come in many ways. Of course the seller can require a large down payment. However, some other options include additional co-signers on the loan or equity in a 2nd property. If the buyer owns another home or an investor own additional property, the seller can attach their seller finance note to the other property. This will make it more painful for the buyer to default because the seller can claim the additional property in the event of a foreclosure.

In selling a property it is the owner who has control over the entire transaction when they offer seller financing. The seller controls all the aspects of the sell including the timing, the price, the terms, their return on investment, and security and protection of their equity. Since the seller has the flexibility to craft a sell the meet all of their needs, why would you sell it any other way?

How would you like to offer seller financing but remove all personal liability for the property after the sale? How would you like to increase your income from your rental property and get rid of ALL property management? How would you like to get paid twice what your property is worth? How would you like to sell your investment property and never pay capital gains taxes? Stay tuned for some practical examples of seller financing tips and techniques that will keep you out of trouble when you sell your property.

I just stumbled across an amazing opportunity. It’s called the SpiderWeb Marketing system. This system is a way to create “viral” marketing, getting people to tell people who tell people about you and your website, product (to sell), etc. The amazing part about it is that you can actually make money generating these leads for yourself!

I found this system while investigating ways to market and advertise on the Internet. After all, this economy hasn’t been the greatest and the real estate market has made headlines with a lot of bad news. However, those of us still in the real estate game know that this is the best time to buy real estate in years. With falling prices and record low interest rates there may not be a better time to buy in your lifetime. So I’m trying to find as many buyers who would be interested in a home and recognize today’s opportunity. In my search for better marketing methods I stumbled onto this SpiderWeb Marketing system that will market on autopilot!

As I researched this system a little more I found out that there is a business opportunity as well. Did I mention that the entire system is free with online tutorials to help you set up the marketing system? Amazing! Since there are 2 major opportunities here and since I just discovered this system I thought I would seek some feedback from you.

Please take a minute to check out my new marketing website and then let me know what you think. My website is http://kampspider.ws/. I appreciate your perspective and look forward to your comments.

“A Las Vegas bankruptcy judge has dealt a blow to an obscure but critical piece of the mortgage enforement machinery that could slow foreclosures.

“After a rare hearing in front of three judges last year that initially encompassed 27 cases, U.S. Bankruptcy Judge Linda Riegle has ruled that the Mortgage Electronic Registration System (MERS) could not represent lenders seeking to foreclose on delinquent homeowners already in bankruptcy unless it could produce the actual loan note. This goes to the heart of how home lending has evolved over the past two decades, with a loan rarely staying on the books of the originator but often being sold several times to other institutions or investment groups. As a result, producing a loan document is far more complex than opening a drawer in a filing cabinet.” (Tim O’Reiley)

Essentially the court ruling means that a lender must be able to produce the actual mortgage note in order to foreclose. While this case has been appealed, it awaits to be seen what the ultimate ramifications are for all the mortgage notes being serviced by someone other than the lender and what rights they maintain through the foreclosure process.

“On Friday, the U.S. Department of Housing and Urban Development (HUD) announced that first-time home buyers using FHA-approved lenders can now get an advance on the $8,000 tax credit created by the stimulus package and apply it toward their down payments or closing costs.” (CNNMoney.com)

First time home buyers can now utilize their tax credit toward the purchase of their homes. But this money comes with some stipulations. FHA still requires that the buyer bring 3.5% of the purchase price as a down payments, however, the tax credit can be used to lower their principal balance, closing costs, buy-downs, etc.

The tax credit money is utilized through a bridge loan (a short term loan). Some other states have already implemented plans to help these first-time home buyers to utilize their tax credits. These states include Colorado, Missouri, New Jersey, Pennsylvania, Tennessee and Washington. Each of these states has created a different plan for utilizing the credit but it has allowed many new homeowner buy their homes without completely depleting their cash reserves.

The FHA loan limits for Utah County are as follows:
Single Family Home – $323,750
Duplex (2-family) – $414,450
Triplex (3-family) – $500,950
4-plex (4-family) – $622,600

The FHA loan limits for Salt Lake County are as follows:
Single Family Home – $729,750
Duplex (2-family) – $934,200
Triplex (3-family) – $1,129,250
4-plex (4-family) – $1,403,400

These limits were effective as of Wednesday, February 25, 2009.
For more current info check at HUD.gov

President Barack Obama’s “Making Work Pay” massive economic recovery package enacted in February, might be more appropriately names “Making Workers Pay” after American’s enjoying these tax credits discover they may have to pay them back next April.

Obama has boosted the tax credit as one of the big achievements of his first 100 days in office, stating that 95 percent of working families will qualify in 2009 and 2010.

The tax credit pays workers 6.2 percent of their earned income, up to a maximum of $400 for individuals and $800 for married couples who file jointly. Individuals making more than $95,000 and couples making more than $190,000 are ineligible.

The tax credit was designed to help boost the economy by getting more money to consumers in their regular paychecks. Employers were required to start using the new withholding tables by April 1, 2009.

So what’s the problem with the plan? Most workers started receiving the credit through small increases in their paychecks in the past months. But the new tax withholding tables issued by the IRS may cause millions of taxpayers to get more money than they are entitled to under the credit, and this money will have to be repaid next April.

The Internal Revenue Service (IRS) acknowledges these problems with the withholding tables but has done little to warn average taxpayers to date.

Problems for Single Workers with Two Jobs:

A single worker with two jobs making $20,000 a year at each job will get a $400 boost in take-home pay at each of them, for a total of $800. That worker, however, is eligible for a maximum credit of $400, so the remaining $400 will have to be paid back at tax time – either through a smaller refund of a payment to the IRS.

Problems for married couples with spouses who both work:

A married couple with a combined income of $50,000 is eligible for an $800 credit. However, if both spouses work and make more than $13,000, the new withholding tables give them both a $600 boost – for a total of $1,200. (There were 33 million married couples in 2008 in which both spouses worked. That’s 55 percent of all married couples, according to Census Bureau data.)

Problems for college students:

A single college student with a part-time job making $10,000 would get a $400 boost in pay. However, if that student is claimed as a dependent on a parent’s tax return, they don’t qualify for the credit and would have to repay it when they file next year.

Problems for retirees:

The Social Security Administration is sending out $250 payments to more than 50 million retirees in May as part of the economic stimulus package. The payments will go to people who receive Social Security, Supplemental Security Income, railroad retirement benefits or veteran’s disability benefits. The payments are meant to provide a boost for people who don’t qualify for the tax credit. However, they will go to retirees even if they have earned income and receive the credit. Those retirees will have the $250 payment deducted from their tax credit – but not until they file their tax returns next year, long after the money may have been spent.

Retirees who have federal income taxes withheld from pension benefits also are getting an income boost as a result of the new withholding tables. However, pension benefits are not earned income, so they don’t qualify for the tax credit. That money will have to be paid back next year when tax returns are filed. (More than 20 million retirees and survivors receive payments from defined benefit pension plans, according to the Employee Benefit Research Institute. However, it is unclear how many have federal taxes withheld from their payments.)

Tax Tip: Check your federal withholding to make sure sufficient taxes are being taken out of your paychecks. If you are married and both spouses work, you might consider having taxes withheld at the higher rate for single filers. If you have multiple jobs, you might consider having extra taxes withheld by one of your employers. You can make that request with a form W-4. The IRS has an online withholding calculator to help you check your withholding amounts. You can find this calculator at www.irs.gov or you can call your accountant or tax attorney to ask for assistance with adjusting your withholdings.

This information is provided by the tax professionals at Kingman Winslow LLC