UTAH REAL ESTATE INVESTOR

I saw these 2 videos that help to explain the “credit crisis” of today’s economy. It also helps to explain why it has become increasingly difficult to get a mortgage, even for good borrowers with great credit.

The following is an excerpt from an article written by Harvey Mackay about how to negotiate. Since this list was so simple and straight forward I wanted to share it.

1. Never accept any proposal immediately, no matter how good it sounds.
2. Never negotiate with yourself. You’ll furnish the other side with ammunition they might never have gotten themselves. Don’t raise a bid or lower an offer without first getting a response.

Here are some more rules of the road:
3. Never cut a deal with someone who has to “go back and get the boss’s approval.” That gives the other side two bites of the apple to your one. They can take any deal you are willing to make and renegotiate it.
4. If you can’t say yes, it’s no. Just because a deal can be done, doesn’t mean it should be done. no one ever went broke saying “no” too often.
5. Just because it may look nonnegotiable, doesn’t mean it is. Take that beautifully printed “standard contract” you’ve just been handed. Many a smart negotiator has been able to name a term and gets away with it by making it appear to be chiseled in granite, when they will deal if their bluff is called.
6. Do your homework before you deal. Learn as much as you can about the other side. Instincts are no match for information.
7. Rehearse. Practice. Get someone to play the other side. Then switch roles. Instincts are no match for preparation.
8. Beware the late dealer. Feigning indifference or casually disregarding timetables is often just a negotiator’s way of trying to make you believe he/she doesn’t care if you make the deal or not.
9. Be nice, but if you can’t be nice, go away and let someone else do the deal. You’ll blow it.
10. A deal can always be made when both parties see their own benefit in making it.
11. A dream is a bargain no matter what you pay for it. Set the scene. Tell the tale. Generate excitement. Help the other side visualize the benefits, and they’ll sell themselves.
12. Don’t discuss your business where it can be overheard by others. Almost as many deals have gone down in elevators as elevators have gone down.
13. Watch the game films. Top players in any game, including negotiating, debrief themselves immediately after every major session. They always keep a book on themselves and the other side.
14. No one is going to show you their hole card. You have to figure out what they really want. Clue: Since the given reason is never the real reason, you can eliminate the given reason.
15. Always let the other side talk first. Their first offer could surprise you and be better than you ever expected.
– Harvey Mackay

How would you like to know a way to sell your home using seller financing but have no risk in the transaction. This can be accomplished through “equity only” financing. This means that the owner can sell their home and only seller finance their “equity” in the property.

While “seller financing” may sound like a scary term to most people it is actually a very powerful tool for increasing the value of your property. The main reason that seller financing will add value to your property is that you increase the number of people who can qualify to purchase your property because you control the qualification standards. The more people who can buy your home the more valuable it becomes (the basic law of supply and demand).

“Equity Only” financing is exactly what it says, the owner only finances the equity they have in the home. The way this works is the buyer is required to secure their own financing equal to (or greater) than the owner’s underlying mortgage. The loan proceeds from the buyer’s loan will pay off all indebtedness of the owner and remove the owner from future liability. The balance of the purchase price is then financed by the owner to the buyer.

Why would this be a great deal for everyone? The owner is able to sell a home more quickly than other comparable homes on the market and for full market value (sometime more). The owner is also able to dictate the terms of the financing to meet their needs. The buyer has an easier time to qualify for their conventional loan and may even qualify for better rates (depending on the LTV of the loan). The mortgage broker gets new business and a lender gets a new loan to service. Any real estate agents involved with generate commissions. The wheels of the economy turn and everyone is happy.

While there is no such thing as “no risk”, the owner in this situation has very little risk. If the buyer pays as agreed then the owner collects interest on their equity and will still preserve all of their equity too. However, should the buyer fail to pay, the owner is in a powerful position to take the house back (through foreclosure) and then sell it again. The foreclosure costs would be paid by the 1st mortgage and the original owner is in a strong position to simply buy back the property. And should the home be bought by someone else at the foreclosure auction, any dollar amount over the 1st mortgage is paid to the previous owner, thereby allowing them to collect their equity at the foreclosure auction.

Example:
Let’s assume the home is worth $100,000 and the owner has 20% equity ($20,000). By offering seller financing the owner could probably sell the home for $105,000 but we’ll assume that it is sold for $100,000. The buyer would then get a loan for $80,000 and the seller would finance $20,000 (for a $100,000 purchase price). Because the conventional loan amount is only 80% there would be no mortgage insurance which reduces the mortgage costs to the buyer (making it an even better deal).

The seller was going to use the $20,000 as a down payment to buy the next house for $200,000. With 10% down payment the seller would have had a loan for $190,000 at 6% interest with a mortgage payment of $1,140/mo. Without the 10% down payment the seller gets a loan for $200,000 at 6.25% for a payment of $1,230/mo. So the seller offers the $20,000 seller finance note of the sale of the first house at 7% interest only which gives $115/mo payments to off-set the difference for the second house payment. In the end, the seller is better off by $25/mo.

But what if the seller is able to sell the home for $110,000 instead of $100,000? Then the buyer still gets a loan for $80,000 and finances $30,000. $30,000 at 7% interest only payments is $175/mo which is $85/mo better than an outright sale. And when the buyer sells (or refinances) the property the seller will net an additional $10,000 of equity. Over 5 years this would equal an additional $15,100 for the seller ($10,000 additional equity and $5,100 additional payments). So the seller makes an additional 15% on the sale of their home using this form of seller financing.

What we must learn and remember is that seller financing is better for the seller than it is for the buyer.

Annually, over 40,000 fires are attributed to home electrical wiring. These fires result in over 350 deaths and over 1,400 injuries each year. Arcing faults are one of the major causes of these fires. When unwanted arcing occurs, it generates high temperatures that can ignite nearby combustibles such as wood, paper, and carpets.
Arcing faults often occur in damaged or deteriorated wires and cords. Some causes of damaged and deteriorated wiring include puncturuing of wire insulation from picture hanging or cable staples, poorly installed outlets or switches, cords caught in doors or under furniture, furniture pushed against plugs in an outlet, natural aging, and cord exposure to heat vents and sunlight.

How can this risk be reduced? For about the last 5 years builders have been required to install Arc Fault Circuit Interrupter (AFCI) breakers for all bedroom circuits in new construction. In 2010 most circuits in the house must be protected. For more information check out the AFCI Fact Sheet.