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Alternative Financing


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A class on Alternative Financing

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Alternative Financing

  1. 1. Creative Financing Education P u zz l e d about Seller Finance?
  2. 2. <ul><li>CE Class </li></ul><ul><li>brought to you by </li></ul><ul><li>www. W ant M ore L eads . com </li></ul>
  3. 3. Your Presenters <ul><li>Rob Aubrey </li></ul><ul><li>Associate Broker 801-999-8209 </li></ul><ul><li>Credit Repair [email_address] </li></ul><ul><li>Owner/Coach </li></ul><ul><li>Jax Pettey </li></ul><ul><li>Real Estate Attorney 801-208-0025 </li></ul><ul><li>President of 1 st National Title [email_address] </li></ul><ul><li>George Andersen </li></ul><ul><li>Mortgage Banker 801-550-1382 </li></ul><ul><li>Credit Education [email_address] </li></ul>
  4. 4. THE REAL ESTATE MARKET has shifted drastically and dramatically. Sales volume and the number of transactions have dropped significantly. Inventory has reached an all-time high. Buyers have never been more reluctant. Fear is rampant, anxiety is high, people are getting out of the business left and right. Sound familiar? Sure it does. The year was 1979 and that’s what was happening all around me. Gary Keller ~ from the book Shift How Top Real Estate Agents Tackle Tough Times
  5. 5. Discussion Topics <ul><li>Seller Financing… </li></ul><ul><li>Just a short term “Bridge Loan”? </li></ul><ul><li>How does the BANK look at it? </li></ul><ul><li>The Long Term Solution </li></ul><ul><li>How does the LAW look at it? </li></ul><ul><li>The Legal and Board of Realtor Side </li></ul>
  6. 6. Not Cover Today Cover Today Real Estate Principles, Contracts, Mortgages, Credit, Law
  7. 7. The Reality… <ul><li>25.5 % of Credit Reports Have a Score of 599 or below *Wall Street Journal 07/13/2010” </li></ul><ul><li>Most Bank FHA Overlays a minimum of a 640 Credit Score </li></ul><ul><li>Feeder population of “un-banked” </li></ul><ul><li>Not counting Self Employed that have good credit </li></ul><ul><li>Over supply of housing </li></ul><ul><li>Conventional Pricing can be very punitive </li></ul><ul><li>Just a blip??? </li></ul>
  8. 8. The Options… <ul><li>Get out of the business </li></ul><ul><li>Prospect, lead generate and market soooo much that you have enough leads to sustain you </li></ul><ul><li>Learn to do business in Today’s Market </li></ul>
  9. 9. Alternative Financing What are some of the things you know about seller financing? What are the Pros? What are the Cons? Gather in Groups and discuss pros and cons Each Table give one pro and one con
  10. 10. Where is the resistance? <ul><li>The home owner The listing agent </li></ul>Visual Acuity - Test #1
  11. 11. Starting With The End In Mind <ul><li>In order to have successful transactions and to protect the public. </li></ul><ul><li>We must start with the end in mind. </li></ul><ul><li>Like any venture a goal and plan is the best way to achieve it. </li></ul>
  12. 12. The Role of the Lender <ul><li>Identify the Road Block </li></ul><ul><li>Prescribe the Remedy </li></ul><ul><li>Set time frames </li></ul><ul><li>Get commitments </li></ul><ul><li>Structure the final close </li></ul>On the hook, and get paid LAST!
  13. 13. Where is Contract for Deed? <ul><li>What is the 4155? </li></ul>Is this something new? Will it stick around? Magna Carta What are overlays?
  14. 14. D y n a m i c a ll y structured seller financing <ul><li>Uniform Real Estate Contract (Contract for Deed) </li></ul><ul><ul><li>Can write over an FHA or a VA loan </li></ul></ul><ul><ul><li>Buyer may use combinations of cash and hard costs of improvements to satisfy down payment </li></ul></ul><ul><ul><li>Seller retains title HUD Circular Letter 7 - 90 </li></ul></ul><ul><ul><li>Buyer holds enforceable “Equitable Interest” </li></ul></ul>
  15. 15. <ul><li>Direct substitutes for a CA$H down payment </li></ul><ul><li>Roofing </li></ul><ul><li>Windows </li></ul><ul><li>Insulation/weather stripping </li></ul><ul><li>HVAC systems </li></ul><ul><li>Solar and wind systems </li></ul>Fun things you can do with FHA loans <ul><li>Negotiated with other sales concessions </li></ul><ul><li>Carpet and decorating allowance </li></ul><ul><li>Plumbing and electrical fixtures </li></ul><ul><li>3 ways to borrow money for down payment </li></ul>
  16. 16. Fico, the big 3, and big business <ul><li> (2008) </li></ul>In June of 2004, the Public Interest Research Group revealed that (79% or more) have significant errors in their credit profiles. These errors affected credit scores by 50+ points. 10 th Circuit Appeals Court ruled that E-Oscar is not a reasonable validation method (2010)
  17. 17.   Government bail out for credit scores? Credit Education!!! You cannot play the seller finance game without this relationship…
  18. 18. How To write the Offer <ul><li>REPC </li></ul><ul><ul><li>May need to cross out certain sections. </li></ul></ul><ul><li>Seller Finance Addendum </li></ul><ul><ul><li>Select Appropriate Terms </li></ul></ul><ul><li>For Contract for Deed </li></ul><ul><ul><li>Select Other </li></ul></ul><ul><ul><li>Write “Contract for Deed/UREC” </li></ul></ul>
  19. 19. More items to chew on… <ul><li>#1 Sales are entered on the MLS </li></ul><ul><li>#2 Transaction is eligible for a 1031 Exchange </li></ul>Paradigm Shift – it’s the decade of the Realtor
  20. 20. Benefits to the Transaction? <ul><li>HUD1 settlement statement </li></ul><ul><li>Owner’s policy of title insurance </li></ul><ul><li>Closed with 3 rd party legal advice </li></ul><ul><li>Payments made to, and “trigger” documents flow through, a 3 rd party escrow company </li></ul>… Looks, feels, and acts like an institutional closing
  21. 21. <ul><li>Make a bigger net </li></ul><ul><li>Haul in ALL the fish </li></ul><ul><li>Sift and Sort Policy </li></ul>Revised Sales Strategy
  22. 22. What is the Objective? <ul><li>Share the information and educate </li></ul><ul><li>Set up regularly scheduled classes for: </li></ul><ul><li>Our peers and co-workers who </li></ul><ul><li>will attend this class </li></ul><ul><li>b. Our Sphere of Influence who will </li></ul><ul><li>attend a Consumer Oriented class </li></ul>
  23. 23. From Theory to Practice =
  24. 24. Just do it! You retain on average only 7% of what you hear. To learn, you must DO.
  25. 25. First thing: write it down <ul><li>Legal advice must be given in each of these transactions. </li></ul><ul><li>You should not give it: </li></ul><ul><li>Every Seller Finance Transaction Requires Legal Advice </li></ul><ul><li>Institutional Lenders Have Attorneys </li></ul><ul><li>Now the Seller is the Lender </li></ul><ul><li>Buyer Takes Part In Creating the Contract </li></ul>
  26. 26. More or Less <ul><li>Buyers </li></ul><ul><li>Sellers </li></ul><ul><li>Transactions to do </li></ul>
  27. 27. Then What’s the Problem
  28. 28. Solution
  29. 29. Seller Finance Options <ul><li>Lease Option </li></ul><ul><li>2. Contract for Deed </li></ul><ul><li>3. A.I.T.D. </li></ul>Strong For Mo. Legal You Seller 2 $500 Both 2-7 $1,500 Buyer 7 $500 to $1500
  30. 30. In order to have a successful transaction , you must: <ul><li>Customize Contracts to Meet the Specific Needs of each party to the contract </li></ul><ul><li>Correctly Educate all parties to ensure Creditability and Comfort </li></ul><ul><li>Indemnify, Indemnify, Indemnify </li></ul><ul><li>Close the Transaction </li></ul>
  31. 31. How do you get people into your Buyer Pool
  32. 32. Other Agents Buyers Pool Lending Partner Ghost Signs KSL and craigslist Past Clients Radio Webinars Business Owners Seminars 7 referrals
  33. 33. Three Types of People <ul><li>Those that don’t get it and do it, </li></ul><ul><li>They will be SUCCESFULL </li></ul><ul><li>2. Those that get it and do it </li></ul><ul><li>They will be VERY SUCCESFULL </li></ul><ul><li>3. Those that don’t do it </li></ul><ul><li>Learn the script, “Would you like fries with that?” </li></ul>Next Class in….???