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How to Turn a Non-Buyer... Into A Buyer !

With the Financial and Mortgage Industries "tightening up" their loan requirements... an extra boost is often needed for buyers to be able to qualify for the home they want to purchase.  Here are a few suggestions on how to help someone who wants to buy a home... but really needs some help in doing so.

One of the most frustrating things a seller can experience... is finding a buyer who is both READY to buy their home, is also WILLING to buy their home, but for a variety of reasons... is UNABLE to purchase.  The ability to assist that buyer in a variety of ways... can often be the difference between a home selling... or staying on the market... and just "sitting there."  Here are just two of those ways:

Many buyers have both the income, and the credit to qualify for their mortgage loan... even with the current sub-prime mortgage market crisis.  Although many young buyers have great jobs and decent credit... the great majority of them have not been able to put away the necessary dollars to use for the "closing costs" needed in order to close on their home.

Buyers can fix this problem by allowing the seller to keep their price where it is listed... rather than making an offer on the home... and then asking the seller to use that money to help them in a different way.

Look at it this way:  A price drop of Six Thousand Dollars will probably only lower the monthly mortgage for the buyer by approximately $42.00 per month.  Not much of a payment drop to either get excited about... or to help the buyer qualify.  But... if the buyer does not have the cash needed to pay their closing costs... they cannot close.

In cases like this, the prudent seller will find a buyer more willing to buy their home if they offer to pay the buyer's closing costs... which in my above example... will amount to $6,000.00  Without that help... no sale.  With that help... Call The Movers !

A second way for a seller to help a buyer... would be when the buyer is having trouble qualifying because the payments are too high.  This would really be helpful when the buyer is straight out of college, and will not hit their income "stride" for perhaps two years after being "on the job." 

In cases like this, the same Six Thousand Dollars in the example above can be utilized in a different way to assist the buyer.  It's something called a "Buy-Down."  In an interest rate "buy-down... " which usually costs somewhere between 2.625 points and 3.000 points... (to be paid by the seller) the interest rate is reduced for year ONE by two percent, and in year TWO by one percent... leveling off in year THREE... and REMAINING at that level-three rate for the remaining Twenty-Eight years of the mortgage. 

This is in NO WAY a type of ARM... or Adjustable Rate Mortgage... that has been in the news so much lately.  This is a "fixed-rate" mortgage... sort of with a two-year "head start."  By doing this, the buyer's house payment will be dropped hundreds of dollars in Year One, and Half that amount in Year Two.

Neither of these two ways for the Seller to assist the Buyer... is affected by the recent HUD ruling forbidding the use of a DPA program... a Down Payment Assistance program.  Right now, FHA Mortgages allow the seller to "assist" the buyer by up to six-percent of the sales price of the home.  These monies are what is referred to as the 6% Seller Contribution.  The only caveat is that it cannot be used for the buyer's down payment.  Therefore... this is still an approved method that the Seller can use to help the Buyer.

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Although Karen Anne Stone is not a mortgage professional, as a Realtor she has extensive knowledge of the mortgage market.  You should, however, consult a mortgage professional to confirm Karen Anne's above suggestions.  Karen Anne can be visited on her website at www.NewHomeHuntersOfTarrantCounty.com , or can be reached by phone at (817) 929-3400 , or by email at KarenAnneStone@gmail.com .  If You've Got Problems... Karen Anne just might have the answers !

Comment balloon 15 commentsKaren Anne Stone • October 01 2007 04:38PM

Comments

You have years of experience Karen Anne!!  Thank you for your helpful posts!!  I have much to learn about the mortgage market...thanks for the "schooling" for one night!
Posted by Susie Roscoe, Real Estate Specialist | Brandon, FL (Signature Realty Associates) about 11 years ago

Susie:  You are just too sweet for words.  Thank you for your very kind comments.  Having a good working knowledge of home mortgage financing has always been a very big asset for me. 

It really blows my mind when some Realtors almost refuse to talk payments with buyers... mostly because they simply do not know how, or are afraid to.  I cannot in any way see how I, as a buyer's agent, can expect a buyer to commit to purchasing a home... when I cannot explain financing to a buyer in a way that puts them at ease... and also in a way that I myself, as their agent, feel comfortable with what I am telling them.  Again, Susie... thanks for visiting.   Karen Anne

Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) about 11 years ago
I've advertised buy-downs on new construction and had great success. Sellers can 'sell' their homes with enticing offers. We just have to remember, we're not selling plasma TVs, Vacations, or cars. We ARE selling houses. So if a buyer is up to the plate, let's help them out and get the SOLD sign up!
Posted by West Hartford CT Real Estate Agent | West Hartford Realtor | www.CTMike.com (ERA Broder Group) about 11 years ago

Yes, Michael.  When the seller offers buy-downs to the buyer, they can be a great help.  Before they can do that, they need to understand how helpful a buy-down can be to the buyer of their home who probably needs extra help.

Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) about 11 years ago
Buydown is another option.  With DPA being eliminated (maybe) by HUD how will the buydown stand?
Posted by Rosemary Brooks, The Mother & Daughter Realty Team (BMC Real Estate - 209-910-3706) about 11 years ago
Hi Rosemary:  Yes, the DPA is eliminated (maybe, depending on the Nehemiah lawsuit), but Interest Rate Buy Downs are not affected.  In the typical FHA mortgage, the Seller is allowed to "assist" the Buyer in paying either points or closing costs FOR the buyer... NOT downpayment... up to the amount of Six Percent of the sales price of the home.  This is not affected by the recent DPA decision.  Thank you for commenting, Rosemary.
Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) about 11 years ago
Karen:  Very informative post.  I have bookmarked it so I can read again when I'm not so tired and really think through your information.
Posted by Donna Yates, Blue Ridge Mountains (BHGRE - Metro Brokers) about 11 years ago
Hi Donna:  Thank you for your kind comment.  I have been a Realtor for quite a while, and a math teacher before that.  So, I know my mortgage stuff.  I am glad you found my post informative, and I welcome you to email me, or post questions to me if I can be of any help in the future... as far as perhaps suggesting solutions for you.  Take care... and thanks for visiting.
Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) about 11 years ago
Great point, I have been using all sort of alternate methods to help my buyers and sellers. Two years ago it was a much tougher for buyers to get closing cost assistance but now it is much easier. The market has normalized and I love it. Great post.
Posted by Frank Harris (Keller Williams Realty Centre) about 11 years ago
Hi Frank:  Thank you for your kind comments.  I think in the near future, until all the "fear factor" stuff that dodo birds like Jim Cramer are crying about on the Today show finally dies down, we will need to be a bit more creative (within the law, of course) to best represent our clients.  Take care... thanks for visiting.
Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) about 11 years ago
Great info! I am VERY CREATIVE when it comes to finding ways to help my buyers and sellers find a meeting of the minds. I always remind everyone in the transaction that we all want the same thing...we have a common purpose...let's act like it!! Blessings! Elizabeth
Posted by Elizabeth Nieves, Bilingual Raleigh - Durham North Carolina Real Estate Team (The Elizabeth Nieves Realty Group) about 11 years ago
Hi Elizabeth:  Yes, when we all work toward a common goal, everyone benefits.  Usually when I try to make helpful suggestions to the "other" broker, my ideas are very well accepted.  Once in awhile they get really defensive.  I try and be low key and tactful when I try and help, remembering that there are ego's involved.  Usually everyone works together.  Thanks for your comment, and thanks for visiting.
Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) about 11 years ago
Karen great post I gave you a 5 How do you bookmark a post I would love to save this one. if possible could you email me, and tell me how
Posted by Dan Tobias, Northridge Real Estate Expert (Rodeo Realty) about 11 years ago

Hi Dan:  Thanks for your kind comments... and the "5" Dan.  This is how you bookmark.  Once you have read a blog post, and have graded it... as when you just gave me a "5"... to the right of the "5" is a little envelope. 

To the right of that is the word "bookmark."  Click on the word "bookmark."  It will then put the post you just read on your list of bookmarked posts. 

Then, go back and click on that same "bookmark", and it will display on your screen all of the posts you have bookmarked. 

Then, just click on the post you want to read from your list of bookmarked posts... and it will open onto the screen.  Dan, if this does not work, email me or ask me in a comment box, and I will try and walk you through it.  Take care... and thanks for visiting my blog post.     Karen Anne

Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) about 11 years ago

I especially love the point about dropping the price 6,000 or paying the closing costs. What a difference that could make!

Posted by Joni Bailey, Your Huntsville / Lake Livingston Area REALTORĀ® (Berkshire Hathaway Home Services - Anderson Properties) about 5 years ago

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