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Creative financing might help sell your home

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Also check on whether the standard "due on sale" clause can be waived. While Hanson and Patton point out that lenders would have no reason to call a loan due, provided payments are still being made on time (since foreclosure proceedings are costly), Christiansen says it's something to inquire about and that lenders may waive it.

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It's also important to consult a real estate attorney if this route is being considered. Mortgage assumptions are often confused with purchases that are "subject to a mortgage." Typically, "subject-to" deals are those in which the purchaser agrees to make monthly payments on an existing mortgage but the original borrower remains personally liable if the new buyer fails to make those payments. Because of that liability, the lenders consent is not required.

Besides being a seller risk (think credit risk and foreclosure), subject-to sales aren't legal, according to Paul Wylie, CEO of Southern California-based Metrocities Mortgage. In addition, Wylie adds, "A lender could find out about an unlawful assumption and call the loan due."

2. Help a buyer build a down payment through a lease-to-own deal.
The buyer acts as tenant for a set period of time (usually one to three years), with some of the rent getting socked away in an escrow-type account to later be applied toward a down payment. In a lease-option situation, the buyer can choose not to buy at the end of the option period, but would generally lose that built-up cash. With a lease-purchase, the buyer must purchase the house in the end.

Either way, the buyer becomes a tenant for now. Only he doesn't "have the typical tenant mentality," notes Patton, because the intention is to one day buy the house.

Yes, these deals are risky.

"Lease purchases are hairy-scary to me because you still may have the buyer walk (and) the seller is still the owner," says Janice B. Leis, a Prudential Realtor covering Pennsylvania, Florida and New Jersey. "And usually both sides are too cheap to hire a real estate attorney. Sellers need to stay away from those legal entanglements that may create more of a financial wrangle for them down the road."

But there are some good potential tenants today, says Stan Lund, owner of a mortgage firm and 2007-2008 president of the Arizona Association of Mortgage Brokers. "A lot of people have lost homes due to foreclosure. They're good people but just had some bad circumstances happen to them. They're good borrowers but maybe they got into the wrong loan, or they took a chance in risk and tried to (own too much) house."

Bobby Wallace, South Carolina affiliate for 1800sellnow.com, compares lease-to-own deals to, "selling someone a home with training wheels." His suggestion for sellers: Do "everything in your power to make the buyer truly realizes that this is a tremendous opportunity to enhance their credit and not waste it."

Sellers can emphasize a number of advantages to the buyer:
Immediate occupancy, even though it's not being bought immediately.
The chance to build up a credit score over time and qualify for a better mortgage rate at the end of the lease.
Forced savings through the monthly rent credit. Wallace's company helps reinforce these positives for buyers through a monthly (and sometime more frequent) newsletter.

Still, it's important for sellers to be cautious in negotiations. First, if the market goes up you could be locked into a too-low purchase price.

And the legalese is tricky. So be sure to hire a real estate attorney to handle the paperwork. With a lease-purchase deal, definitely find a buyer who will likely be able to "get a mortgage down the road," says Patton. "Otherwise you will be suing them in court to buy your home (not a good experience)."

 
 
Next: "If you've got the equity, offer financing yourself."
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