Can't Sell That House!
If someone tells you a "seller carryback" is a good idea--and I heard it on the radio the other day--run screaming from the room. You don't want to be the banker for the people trying to buy your house. Granted, even credit worthy buyers are having a hard time qualifying for a mortgage, but if the banks won't touch them, you shouldn't either.
Some experts have actually advised home owners sweeten the deal on a home that's not moving by agreeing to finance the purchase with what's known as a "seller carry back." Breaking it down to its simplest form, the seller lends the buyer the money to buy the seller's house. Granted, it sounds weird, but it was appealing back in the 1980's when mortgage interest rates rose well into the double digits. Buyers liked it because they didn't have to go through a bank and they could negotiate the interest rate. Sellers found it useful because it made their home more appealing and they could negotiate a higher sale price. The carry back could cover a first or second mortgage, and even more likely, just a portion of the selling price.
Now here's the rub, if the buyer defaulted, it was the seller's problem, not the banks...because the bank was not the lender. Now flash forward to the economic chaos of the present when people are losing jobs right and left and ask if getting a leg up on the sale is really worth the risk. With the exception of some very select cases, the answer is probably not. Today's good credit risk on paper, could still end up on tomorrow's unemployment line.
So, what do you do if you can't sell? You may think renting your home is a way to buy time and rebuild your equity. But guess what! Currently, rentals are proliferating like bunny rabbits on fertility drugs. As a result properties are sitting and prices are sliding. However, offering your property for rent with an option to buy could at least guarantee you a tenant with possibilities. You don't have to put the property up for sale until appreciation starts kicking in again. In the meantime, you have monthly income from your renter. On the other hand, you still have to buy or rent elsewhere. It's a chess game, one move affects everything else.
What about auctioning off your home to assure it's going, going gone? This is actually one of the best ways to attract a lot of potential buyers. However, you first should accept the fact the best offer will be less than your hoped for asking price. Secondly, in some states you're not allowed to auction off the property yourself, but must hire an auctioneer. The accompanying fee can be several thousand dollars and you may be better off just lowering the price. If the thought of that makes you blanch, and you don't have to sell, sit back and wait for the big turn around. Unfortunately, it may be a long wait.
Remember there is no magic formula. Working with a responsible real estate broker is the best way to pull a rabbit out of your hat. If you want to know more about carry backs, auctions and rentals, check out these links: