Buying and selling homes in AZ right now is tough for most people. Sure, the speculators with cash are out there outbidding you on the courthouse steps to protect their rentals and market share, but what if you are trying to buy or sell a fine home and are NOT a cash buyer?
One way many successful people are solving this problem is by exploring seller financing and carry back options. Simply put, since banks aren’t making loans, people are cutting them out, with good results in many cases. For more information I turned to Arizona Realtor Alex Goldstein, who is doing a tremendous amount of work in this area with great results. – Ike Devji
Seller Financing in Today’s Luxury Home Market
The jumbo lending market is a mess today. Standards for jumbo loans have gotten to such lofty levels that many 7 figure earners are shut out for the flimsiest of excuses. Even if you can qualify for financing, the process is so gut-wrenching that it can suck the joy out of buying a new home.
On the other hand, paying cash for a luxury home doesn’t make a lot of sense when there are so many fantastic opportunities in this “cash is king” environment. Why tie up a million or more dollars in a home when you could expand your business, acquire a new business, or invest in cash flow real estate?
So if you want to buy a home and neither bank loans nor cash makes sense, what do you do? The answer is to purchase a home with seller financing. It’s a technique that’s as old as real estate itself, but fell by the wayside in the go-go days of liar loans and easy credit.
Here are some of the facts about seller financing:
- The selection is much greater than most people realize. There are over 1,000 homes offering seller financing in Maricopa County right now, in every neighborhood and price range.
- Seller financing is often within 2% of the cost of bank financing. So, at 6.5-7% and a tax deduction for primary home interest, that’s not a very high bar for the business or cash flow real estate you acquire.
- It’s becoming more common than ever to negotiate seller financing packages in the luxury market. Sellers have “gotten the memo” that jumbo loans are virtually dead, and they need to be creative to sell. So even if it’s not being offered, it’s more likely than ever that when you ask you will get a positive response.
- Seller financing is only limited by your creativity, you are not limited to the cookie cutter structures of a bank. Whether you want the option to buy down your interest rate, or no due on sale clause, there are a lot of things you can get from a seller that no bank would even discuss.
- It’s a very good time to buy now, but it probably won’t get better. Inventory market-wide is now half of what it was just a year ago — from 8.7 months inventory down to 4.4. Luxury is lagging the overall market, but the overall trend is strong, so if you’ve been sitting on the sidelines it makes sense to start looking sooner than later.
Alex Goldstein is with Realty One Group and is the author of the book The A to Z of Buying a Seller Financed Home in AZ. Visit SellerFinanceAZ.com/Luxury to receive a free copy of the book, or call Alex at (480) 442-7325 to learn how you can buy or sell a home using seller financing.