What To Do When the Real Estate Appraisal Comes in Low in Hendersonville, N.C.

      Mr. Seller's Realtor advises him to list his house for $275,000.  Mr. Seller insists on a $300,000 price.  After a long wait and several rejected offers, Mr. Seller finally gets a $295,000 offer.  He accepts it.

     He congratulates himself for hanging tough and getting the top price. Then the real estate appraiser from the bank shows up to appraise the house.  Mr. Seller points out to him that his rafters are made of 2x8 lumber.  Mr. Seller points out that the nails are extra heavy duty galvanized nails.  Mr. Seller points out several features that his house has that other "ordinary" houses do not have.

     A few days later the appraisal comes back at $269,000.  WHAT!   Is this appraiser crazy?   Mr. Seller showed him all the extras that his house has.  Didn't he see the electric garage door opener with the remote control?

      The first thing Mr. Seller needs to do is get mad.  He needs to call his Realtor and let him know how mad he is.  He needs to let his Realtor know that he knows that real estate appraiser is an idiot.  He needs to tell his Realtor that surely his house is worth $295,000.  The buyer is willing to pay that for it.

     Mr. Seller's first question is probably," Who picked that appraiser?" .  Unfortunately, the answer to that question will usually bring Mr. Seller no peace. Mr. Appraiser was chosen by the bank to protect the bank's interest.

     If Mr. Appraiser says  the house is worth $269,000, the bank is comfortable loaning Mr. Buyer $215,200 or 80% of the value of the house.  Mr. Buyer wants to borrow $236,000 or 80% of $295,000.  Mr. Buyer has scraped up every penny he can to get the $59,000 down payment  together.

     BUT Mr. Appraiser says that the house is only worth $269,000.  What does he know???   Mr. Seller believes that he knows more about property values in Hendersonville North Carolina  than Mr. Appraiser knows.  So what if Mr. Appraiser has been to appraisal school?  So what if Mr. Appraiser looks at more houses in a month than Mr. Seller has looked at in a lifetime?  So what if Mr. Appraiser has been appraising real estate  for 17 years?   So what if Mr. Appraiser has some fancy initials after his name?  So what if Mr. Appraiser is considered to be an expert real estate appraiser?  Who cares about all those credentials?

     After Mr. Seller gets over being mad, he can ask his Realtor for some advice. What can we do to save this transaction?

     We can ask the buyer to pay $295,000 for this house even though the expert real estate appraiser declares that it is only worth $269,000.

     There are two problems with this.  The first problem is that since the house is appraised for $269,000, the buyer has to have $79,800 for a down payment.  That is $295,000, the price, minus the $215,200 that the bank is willing to loan on this house that the bank knows is only worth $269,000.  The bank will loan 80% of the price or the appraisal whichever is lower.

Trying to sell your property for more than it is worth rarely works

     The other problem is that the buyer, not only has to come up with $20,000 more down payment.  The buyer has to sign a form that admits he is certified stupid.  The buyer has to sign a form acknowledging that he is aware that the house was appraised by an expect real estate appraiser for $269,000 but he is buying it for $295,000.  Who would do that?  Only a stupid person would do that. 

     If the seller and the Realtors are lucky, Mr. Buyer will do that IF HE IS ABLE.  He has to have the extra $20,000 to make this happen.  Mr. Buyer says, "I don't care what the experts say.  My wife loves this house and we are buying it."  Let's go to closing.  Sometimes it happens this way.

     More often, this deal dies.  Several months later Mr. Seller accepts a $269,000 offer from another buyer.  We go to closing.   Several months can be a long time if you are making payments on an empty house and paying taxes and HOA dues on an empty house and insuring an empty house and paying utility bills on an empty house. 

     If Mr. Seller's  Realtor advises Mr. Seller to lower the price  and if an expert appraiser that has already been paid advises Mr. Seller to lower the price and if several offerors (buyers) advise Mr. Seller to lower his price and his current buyer that obviously loves the  house but does not have an extra twenty grand advises Mr. Seller to lower the price, maaaaaaaaaaybe  Mr. Seller should start to believe what the entire market is telling him.  His house is not worth $300,000. 

     Price your house right.  It will sell.  Do not depend on "We might get lucky."  for the largest transaction of your life.  No matter how good your Realtor is, he is not good enough to sell your property for more than it is worth. 

    If I can help you with any real estate advise call me at 828 755 6996.  www.firstrealestateschool.com

Owner Financing, An Old Idea That Works in 2018

     Yesterday, we listed a lakefront lot near Hendersonville, NorthCarolina.  This five acre lot is a good buy at $99,900.  The trouble is getting financing.  Banks are not too keen on loaning money secured by vacant lots.

      The good news is that I asked the owner of this lot if she would finance it for a buyer.  She said,"Certainly".

     If you are a buyer, there is no better way to finance your real estate purchase than to have the seller hold the mortgage for you.

     Instead of going to the bank and giving them your life history and begging them to loan you the money, just make your offer on the $100,000 vacant lot.  Make your offer with you, the buyer, putting $25000 down and asking the seller to let you pay the $75,000 balance over a ten or fifteen or twenty year period of time.  Why would the seller say no to that?  The seller would probably want the buyer to pay interest and monthly payments. Of course!

Owner financing makes selling faster.  You will love the interest.  

Usually the only reason that the seller would say no to that is that is because they don't understand.  It is the listing agents job to explain it to the owner.  Most sellers that have sold a lot or a house and held a mortgage loved it.  That monthly check just keeps rolling in every month.  Usually their only regret is that they only own one mortgage.

     I have bought many houses with owner financing.  I have sold a few with seller financing.  It is a great way to buy or sell a house or a vacant lot.  Where else, in today's business climate, can the seller get a decent interest rate on his money? 

     One reason many sellers "think" holding a mortgage is not a good idea is they tell me things like, "I need the cash to buy an airplane or a truck or another property."  Can't you buy any of those things with the incoming payments?  Yes, you can.

     People tell me,"We want to invest that cash in the stock market or buy a mutual fund.".  Invest the $500 per month in the stock market or mutual fund.  That will work. Holding a mortgage is an investment, a good investment. 

     If you have a property for sale, offer to hold a mortgage.  Your property will sell faster and for more money.  You will feel like that interest is falling out of the sky.

     One of the first houses I ever sold with the owner holding a mortgage was for a seventy year old single man.  The price was about $90,000.  He owned it free and clear.  I was about thirty years old at the time.  As we chatted, he told me about his three financially irresponsible daughters.  I asked him how long did he think it would the three daughters to spend their inheritance.  I pointed out to him that if they inherited a mortgage, they would receive payments for years to come.  Leaving an heir a mortgage is a wonderful way to be remembered.

     If you have a house for sale near Hendersonville, North Carolina, call me at 828 755 6996.  I will help you get it sold.  If you have any questions, call me or leave a comment here at the end of this article.  I have a description of  owner financing on video. https://www.youtube.com/watch?  
v=Dbg8GFXH2To        Watch the video.  If you have questions, call me or leave a comment here.

How Can I Find A Seller to Hold Owner Financing For Me

     Dear Steve

     Thanks for the lunch invitation. Do you know that I now live in North Carolina?

     You want to know how to find a seller to hold a mortgage for for you.  The truth is it is harder to do than it was when I was young.  The reason it is harder today, is because  it is harder to talk to sellers  than it was then.  It is still very possible.  I know it is still possible because I sold a house that I owned six months ago.  We were happy to hold the mortgage.   I recently sold a lakefront lot in Carolina to earn a commission.   The owner held the mortgage. https://www.youtube.com/watch?v=Dbg8GFXH2To

     If you are buying a house through a Realtor, they usually do not understand.  If you want to find a Realtor in your area that does understand, go to www.biggerpockets.com .  You can learn a lot at Bigger Pockets.

     If you ask a Realtor,"Do you think the seller will hold a mortgage?", nine out of ten Realtors will reply ,"No".  They won't ask the seller. They have never asked the seller.  You have to learn how to ask the Realtor.   You ask the Realtor,"If I put $100,000 cash down on this $150,000 house, do you think the owner would hold a mortgage for the other fifty thousand?".

     Most laymen and most Realtors assume that, if you ask about owner financing, you want the seller to hold 100% mortgage.  They also assume that you do not have the financial wherewithall to go to the bank.  Neither of these assumptions are necessarily true.

     The best thing to do is to talk to the seller directly.  If you are dealing with a forsalebyowner, this is easy.  Use the same technique when talking with them.

     Idle chit chat is a wonderful thing.  Is your house paid for?  That is  a nice question.  Oh, it is not.  How much do still owe?  Just chit chatting.  Is making payments on this empty house a financial burden for you?  Where are you probably going to invest the proceeds of this sale?  Chit chat. 

     What do you think?  If a couple is living in a free and clear house, do you think they are broke?  Do you think they probably have a lot of money invested elsewhere?  If this is a vacant rental house that the seller owns, why would he NOT want to hold a mortgage for you?  There is only one reason I can think of.  He is  trepidatios about you making the payments.  How can we make the fear go away?  Ask him.  More down payment is the most common answer.

      

     Talk to Mr. Seller.  Ask about his kids and grandchildren. Shoot the breeze. Ask him about his hobby.  Ask him if he owns other investment property.  Ask him if owning investment property and being a landlord has been a pleasant experience. Ask him how he got started.   If you own other rentals with owner held mortgages, mention that in conversation.  Make him a firm offer.  Offer him an interest rate that he can not get at the bank.  A savvy investor will understand that 5 or 6 per cent is pretty good rate in today's world.  An unsophisticated investor may still want "the cash".  What are they going to do with all that cash?  Whatever it is, they can do the same thing with your payments.  Which inheritance  would be more beneficial to your twenty year old grandson , $50,000 cash or $350 a month for the next thirty years?  That fifty grand would not last two years.  Explain that gently to Mr and Mrs.  Seller.

     Often, when a house is listed with a Realtor, it is hard for you, a layman, to talk  with the seller.  A listing Realtor and a selling Realtor are bound by MLS rules and Association of Realtors code of ethics.  You, as a layman, are not bound by any such rules.  Talk to the seller.  You are not breaking any rules.  That is how Kathy and I bought the house that we currently live in in Carolina.  We rode past the house and saw the Realtor's sign in the yard. The sellers were sitting on the front porch drinking Busch Light beer.  We stopped.  We drank a Busch Light. Rick and Murl and Kathy and I negotiated the deal right on the front porch.  We called the listing agent.  She drew up the paperwork.  We all went to closing.

     Realtors discourage their sellers from talking to buyers.  Some listen.  Some do not.  You, as a layman, can talk to to the seller directly.  Why would you not?  Most Realtors do not want the seller and the buyer talking to each other directly for fear that the transaction may happen without the Realtor getting paid.  You be certain that that does not happen.  The listing agent has earned his commission as soon as the listing is signed.  Do not suggest to the seller that  that commission does not need to be paid.  That will get you sued. It will not get you where you want to be, a house owner with owner financing.

     You, Mr. Layman, are violating no law or rule to talk to the seller directly.  Your real estate agent would be violating the rules of the MLS if he talked to the seller.  The listing agent may discourage the seller from talking to you directly.  I do not understand why.  If it is my listing, I just want to go to closing. Every Realtor does not feel that way.  The good news for you, as a layman, is the listing agent would have no reason to call or contact you directly. That would be a violation of the rules of the MLS.

     Show the seller this article.  http://rondclimer.blogspot.com/2015/01/can-owner-finance-house-in.html    Let the seller know that your payments will will be on time every time.  Get the seller to like you and trust you.  That is another article.

     Remember this.  Some will.  Some won't.  So what?  Next.  You may have to talk to a lot of sellers to find one.  You may find the first seller you talk to is ready. You have to kiss a lot of frogs before you find a handsome prince.

      Also, you need to educate yourself.  Read about owner held financing.  Study it.  Talk to people that own mortgages.  Ask them how they like it.  Almost all will tell you they like it.  If interest rates go back to 12%, that might change.  In today's economy, holding a mortgage is a good idea for any seller that doesn't need the money to pay next month's bills.   You need to be able to explain the benefits of holding a mortgage to the seller.  Unless you are in Hendersonville, North Carolina, you will not have me as your Realtor.  If you can find a Realtor that does understand, your problems are over. Good luck with that.  http://ronclimer.blogspot.com/2014/03/where-do-you-find-sellers-that-will.html 

     You need to believe in holding a mortgage.  Start looking at houses and talking to sellers.  You won't believe where it leads you.  Call me anytime if you need or want specific advice. 

     www.ronclimer.com