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“Renting Back” After Your Home Is Sold

Sometimes it’s helpful to sell your home before you really want to move. This often happens when you are having a new home built, but aren’t sure of the completion date. Is there any way you can sell your home so you’re sure of the funds available for the new purchase, but continue to live in your old home until construction of the new one is complete. Yes, there is with the renting back strategy. Enter the Lease-Back or Rent-Back Agreement The particulars of this strategy vary from state to state, but in the strong seller’s market we’re experiencing, buyers will often agree to let the seller stay in the home for a period of time as long as rent is paid. In a competitive situation, the buyer willing to do this will often have the winning bid even though there is another offer as high as his. The agreement covering the situation states the length of time the seller will remain.  It can be done with a specific date named or wording that allows the seller to remain up to a specific date with the possibility of her moving sooner. The amount can be a fixed figure paid out of the proceeds of settlement or a monthly amount, or a daily amount. It is usually, but not always, tied to the amount of the mortgage payment under the buyer’s new loan. Sometimes there is a deposit against damage, sometimes not.  There is usually a clause saying the seller will hold the buyer harmless for any damage to himself or his property which occurs after the sale is consummated and before the seller moves. The attorney who draws up your contract offer can create such an agreement. If you’re using online forms, you should be able to find one for this situation. If you are working with The Lynchburg Team, we can assist you with this type of contract. An Example I’ve recently seen a very pleasant example of this idea in action. An elderly widow contracted to have a one level condo unit built in a new community which provides all exterior maintenance. She had had hip replacement surgery and wanted to get away from the drawbacks of the home in which she’d reared her children. The home was large, had stairs and was located on a large, partially wooded lot with many mature perennials and shrubs. Both the home and garden were beautiful, but high maintenance. Her contract to purchase required a series of deposits and a firm indication as to her source of funds well before settlement on her new condo. The widow put her home on the market. A young couple with two sons was very anxious to buy it. The situation was competitive. They made the widow an offer. She countered their original offer. She did not raise their offer price, which was slightly below her asking price.  She did not believe the young couple would qualify for a larger loan. Instead, she did something rather creative. The widow countered with a proposal that she “rent back” for a period of “up to” a certain date (a date beyond her scheduled completion date on the condo) in exchange for a modest flat sum to be paid to the buyer at settlement. The total rent back period was less than two months. The flat fee was less than the amount of the new mortgage payment for the buyers. However, since they made no payment on their new mortgage the first month, it wasn’t too far out of line. The couple really wanted the home, so they accepted the counter offer. Another win-win situation was created. The widow only had to move one time and the young couple got a house they probably wouldn’t have had in a straight bidding war. If you find yourself in a situation similar to either the widow or the young couple, perhaps you can work out a similar solution.  

Brandon Farber

Brandon Farber

 

Don't Sell Your Property Without It

For most people, the prospect of selling their home can be positively daunting. First of all, there are usually plenty of things to do just to get it ready for the market. Besides the traditional clean-up, painting, fix-up chores that invariably wind up costing more than you planned, there are always the overriding concerns about how much the market will bear and how much you will eventually wind up selling it for. Will you get your asking price, or will you have to drop your price to make the deal? After all, your home is a major investment, no doubt a rather large one, so when it comes to selling it you want to get your highest possible return. Yet in spite of everyone's desire to get the top dollar for their property, most people are extremely unsure as to how to go about getting it. However, some savvy sellers have long known a little financial technique that has helped them to get top dollar for their property. In fact, on some rare occasions, they have even sold their properties for more than they were worth using this powerful financing tool. Although that might be the exception rather than the rule, you can certainly use this technique to get the most money possible when selling your property. Seller carry-back, or take-back financing (also referred to as seller financing and self financing), has proven to be a surefire technique for closing deals. Even though most people do not think about this when it comes to selling a property, they really should consider using it. According to the Federal Reserve, there are currently over 100 Billion dollars of seller carry-back (seller take-back) loans in existence. By any standard, that is a lot of money. But most importantly, it is also a very clear indication that more people are starting to use seller take-back financing techniques because it offers many financial benefits to both sellers and buyers. Basically, seller take-back financing is a relatively simple concept. A seller-take back loan is created when a property is sold and the seller performs like a lender by assisting in financing all or part of the total transaction. In effect, the seller is actually lending the buyer a certain amount of money toward the purchase price, while a traditional mortgage company usually funds the balance of the purchase price. A seller take-back loan is secured with the property. The loan then becomes the primary mortgage and is fully secured by the property. In most seller take-back financing transactions, the buyer repays the seller with interest in accordance to mutually agreed terms over a period of time. Usually, the terms call for the buyer to send the payments, consisting of principal and interest, on a monthly basis. This is advantageous because it creates a steady monthly cash flow for the note holder. And if the note holder decides to cash out, he or she can always sell the note for a lump sum cash payment. Regardless of market conditions, seller take-back financing makes sound financial sense; whereas, it provides both buyer and seller with flexible financing options, makes the property easier to sell at higher price and shortens the sales cycle. It also has the added advantage of being an excellent investment that generates a steady cash flow and high return. If you ever need immediate cash, you can always sell the note through our office. If you are planning to sell a property, consider the many benefits of seller take-back financing.  

Brandon Farber

Brandon Farber

 

It's So Easy, Being Green

With oil and natural gas prices rocketing, stoking terror of long, cold and and expensive winters, a renewed interest in keeping heating costs under control has has been sparked. Homeowner's have an ignited passion in understanding energy saving methods. If you're in this boat, stuck in cold waters, here are some tips for energy saving tricks of the trade. If you're living in a home with a furnace that's more than 20 years old, you may have already attempted the "buy a sweater" method of keeping warm. This is certainly one approach, but these days upgrading your home's conditioning system is a much better option, and will bode well for you in the here and now, and in the long term, should you decide sell your home. More and more, home buyers are looking for homes with energy efficient systems already in place. So, think of these upgrades as a long term investment in the resale value of your home, as well a cost efficient and green alternative to your current conditioning system. Now, with that old choker of a furnace huffin' and puffin' away, guaranteed it's not as efficient as it could be, no matter what fuel type it uses. The newer gas furnaces are mid-efficiency (78-82%) or high efficiency (89-96%). Although the higher efficiency products can cost up to $1000 more than the mid-efficiency products, extra costs will be recouped in a couple years, as they will burn less fuel. And, you'll be the greenest frog on the block, sending less harmful emissions out into the atmosphere. "It's so easy being green", murmured Kermit, once he upgraded his furnace. With oil furnaces, there are again, much more efficient products on the market as of late. But, a oil furnace does need to partner with a good chimney, and so this may be an additional cost to keep in mind Take note, it's still the case that electric heat is more expensive than oil and gas, although a smart combination of central wood stove heat, supplemented by electric heat can be cost efficient. Let it Flow: Change Your Filters! Whether disposable or washable, all forced-air heating/cooling systems use filters. And, these filters need to be maintained and changed. Some filters require monthly changes while other last up to three months, and much depends on the conditions within your home. A dirty filter will restrict air flow and with clogged filters you're blocking heat that would otherwise be keeping you toasty warm. Do yourself a favor and keep on top of the regular changing of your heat filters. This is a pretty easy way to boost your energy efficiency and cut costs. Pump it up: Install a Heat Pump Air source heat pumps are the most common and they are generally used with a back-up heating system. In terms of function a heat pump works by extracting heat from the outside and bringing it in, (in heat mode), and by removing heat from the inside of the house and releasing it outside. ( in cooling mode). The king of heat pumps, though, are ground and water source, or geothermal. And while the initial investment may be great, the saving will be substantial in the long run. These pumps will use 25-50% less energy than conventional conditioning systems. At the end of the day, another simple method to help with soaring heat bills, is to keep an eye on the set temperature levels in your house, What is normally described as room temperature is around 68 Fahrenheit (20 degrees Celsius). Of course, only you can decide where to set the dial. But, if you'd rather avoid the " put on a sweater" method of winter energy conservation, you might consider investing in an improved conditioning system that will bring you warmth today, and will be a smart investment in the re-sale value of your home.  

Brandon Farber

Brandon Farber

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