While most Oregon homebuyers use traditional loan providers like banks, mortgage brokers or credit unions, there are solid reasons (and a very helpful alternative) for purchasing a home without them. Buyers avoid traditional lenders for a variety of factors and when they do, one mechanism they frequently turn to is known in our area as […]
While most Oregon homebuyers use traditional lenders like banks, mortgage brokers or credit unions, there are solid reasons (and a very helpful alternative) to purchase a home without them. Buyers avoid traditional lenders for a variety of factors and when they do, one mechanism they frequently turn to is known in our area as seller financing.
What Is Seller Financing? Also called owner financing, seller terms, owner carry, seller carryback, or seller carry, seller financing allows a homebuyer to purchase a property by making an initial down payment, then making direct payments to the seller. While Oregon law has rules in place especially to regulate large-scale property sellers who handle a significant amount of seller-financed transactions (notably commercial firms, such as finance companies), the process still remains relatively simple for Oregon home buyers and sellers who enter into a home sale without using a traditional lender.
The Basics-A key factor that helps to make seller financing an option is if a homeseller has either no loan, or a very small loan remaining on the property to be sold. Having little or no loan on the home being sold means that more of the buyer’s down payment will go to the seller, and not diverted to the lender of a seller’s existing home loan. Most home loans now have what’s called a ‘due on sale’ clause, which means a seller’s home loan must first be paid off upon the sale of a property. The single factor of having no or little loan balance on a property is often the single most limiting condition in determining if seller financing is an option. If the property has either no loan, or only a small loan remaining, this can really open the door to seller financing.
Basic Tools-Several tools can be used to establish seller financing. In Oregon, these include either a trust deed and note, or a land sales contract. Here is a recent legal article outlining some differences between these two instruments for Oregon seller financing . Most common is the trust deed and note, which can be prepared by Oregon title companies/escrow firms. Less common is the land sales contract, which can usually be considerably more labor intensive and expensive, since in Oregon land sales contracts can only be drawn up by an attorney.
What Makes Seller Financing so Powerful-Seller financing can be very powerful. How else to describe a form of financing that can:
1. Make an otherwise ‘unsellable’ property sellable,
2. Render an otherwise ‘unqualified’ buyer qualified, whilst escaping considerable loan fees, underwriting and requirements, like an appraisal.
3. Provide income to a home seller, with interest, all secured with the protection of a legal instrument in case of default
4. Allow a homebuyer the ability to purchase a home while selling a less liquid (hard to sell) asset, or re-building credit
5. Give both buyer and seller the flexibility to negotiate what works for them, rather than a bank’s pre-determined, ‘cookie-cutter’ loan term, interest rate, or myriad of other conditions.
Here are a few scenarios illustrating some of real life advantages of seller financing-Scenario #1 involves a house located in a large Oregon town with no foundation and a faulty roof. The property is otherwise attractive, yet routine lender guidelines require a foundation for residential properties. The seller begins to think his house is a ‘lemon.’ That is, until he learns that since he owns the property ‘free and clear’ with no loan, that he can sell the property directly to a buyer. A buyer who happens to be a contractor discovers the house and realizes he can put a roof on the house for the cost of materials, then hire foundation work far more cheaply than someone unlike him who is not in the building trades. An agreement is made. As a result, buyer and seller see the transaction as a ‘win-win.’
Scenario #2-involves a nice home located in a tiny Oregon town between the Willamette Valley and Oregon Coast. Given the somewhat remote location, there isn’t a lot of demand for the property in Scenario #2. In an effort to ‘open up the buyer pool’ and ‘jumpstart’ buyer activity, the seller’s Realtor advises his seller client to consider seller financing. The seller agrees and before long, an out of state buyer who just retired discovers the property, located near an elderly relative. The buyer wants to first sell his large ranch in California, but because he will be listing his out-of-state property for 4 million dollars, it may take more than a few months to sell it. The California seller doesn’t want to sell his out-of-state property at a discount and wants to purchase a home meanwhile near his relative. So the Californian strikes a deal with the tiny Oregon town homeseller. Because the seller is open to seller financing and therefore providing the buyer with a helpful benefit, the buyer agrees to pay full price for the seller’s property and places $75,000, or 25% down of the $300,000 purchase price using seller financing. Confident his California property will sell within 3 years, buyer and seller agree to mutually agreeable monthly payments, with a balloon payment of the remaining loan balance within 36 months. The buyer gets full price, a quicker home sale, interest (on top of his full selling price) and the security of a legal instrument as protection in the unlikely event of buyer default. The buyer is provided sufficient time to sell his out-of-state asset, plus can move quickly to live near his Oregon relative. As a result, buyer and seller see the transaction as a ‘win-win.’
Scenario #3 involves a homebuyer who recently experienced a ‘short sale’ on an investment rental he owned. Because traditional lenders are unlikely to loan to borrowers with a recent ‘short sale,’ this homebuyer can either wait until lenders are satisfied that this experience is well behind him, or look at other options. Knowing his buyer’s situation, the Realtor for this ‘short sale’ purchaser searches specifically for, then locates a property suitable for his buyer which is being offered with seller financing. The buyer’s Realtor writes up a clean, solid offer with 20% down at a competitive interest rate and 5 year balloon. The seller accepts the ‘short sale’ buyer’s offer. There is a successful closing of the transaction, years before a traditional lender would have said ‘yes’ to providing the ‘short sale’ buyer with a home loan. As a result, buyer and seller see the transaction as a ‘win-win.’
Covering the Bases-As with any business agreement, things can and sometimes do go wrong. One of the more important factors for sellers to consider prior to entering into any seller financing agreement is a possible default by a buyer, who simply cannot continue making payments as agreed. In this case, placing the situation before an Oregon real estate attorney is frequently a good move. If the buyer is dealing in good faith, sometimes a temporary restructuring of payments can be agreed upon, or mutually agreeable exit strategy to provide the buyer a pathway to meet the agreement, or sell the property. If the buyer becomes difficult, an attorney’s letter can be persuasive.
Happy Bankers-Studies show that traditional lenders start relaxing requirements when a buyer can make a 20% downpayment, known as 80% ‘loan to value.’ This is a good general rule for seller financing, too. A minimum 20% downpayment typically means a buyer will be a better risk. The graph below shows how such an 80% ‘loan to value’ situation has historically reduced the delinquency rate for loan transactions.
Insurance-One other condition for sellers to be aware of relates to insurance. This can include fire and liability insurance. Especially helpful is if the seller is named as a ‘loss payee.’ This means that if there is a loss, such as a fire, the seller has a priority to insurance compensation.
New Rules-Federal and state mortgage laws often change and this is certainly true of Oregon seller financing. The good news is that for many routine transactions, Oregon homebuyers and homesellers can participate in the benefits of seller financing. The latest batch of regulations are largely designed to hold commercial lenders more accountable. If a major creditor or commercial lender is not a seller, the process of buying and selling with seller financing in Oregon can still be relatively simple. These new rules create a situation where it’s best to be clear if you’ll be dealing with a ‘vanilla’ type ‘mom and pop’ seller financing transaction, or a more complicated ‘corporate’ one that requires additional time, money and outside assistance. The following information is not legal advice, but a ‘thumbnail’ overview of two simpler scenarios for Oregon seller financing. For real estate advice, consult a Realtor. For legal advice, consult an attorney.
The ‘Vanilla’ Scenario-Let’s have dessert first. One of the easier scenarios for seller financing is if you’re buying a home from a seller who has lived in the house as a primary residence. This simple factor is a decent sized ‘green light’ and avoids much additional paperwork, like the need to hire a mortgage loan originator, or MLO, to handle the seller financed transaction. Under the new rules, another ‘vanilla’ scenario that simplifies the process are transactions between family members.
The ‘Small Potatoes’ Scenario-Even if the seller has never lived in the home you’re buying, if the seller is deemed ‘small potatoes’ and not a major creditor or commercial lender, the seller can still provide seller financing. In this case, a ‘green light’ to simplicity is found among sellers who have provided seller financing in a home sale for three or fewer transactions within a 1 year period. This exemption is helpful, since few residential homeowners sell even one home each year.
The Meat of the Matter-Regardless of the kind of seller financing you consider, consider working with a professional experienced in this unique area of real estate practice. Seller financing offers many potential advantages, but it’s important to understand the process and your limitations.
Collection Escrow Account-One very convenient service often used by buyers and sellers who use seller financing is called a collection escrow account. Collection escrow accounts are usually set up during the escrow process, once an offer has been accepted. In our region, collection escrow companies receive payments from the buyer on behalf of the seller, while tracking them, then forward the payment to the seller, often by direct deposit or via a mailed check. Why is this convenient? Because both parties then have a state-licensed firm keeping track of payments. This also makes it easier around tax time for buyer and seller. Sellers can more easily show income and buyers can better account for their mortgage interest deduction.
Thinking about using seller financing? Contact Certified Realty for more information at 800-637-1950, or via email at Info@CertifiedRealty.com
Click here or on the ‘play’ button below to hear the audio podcast version of this presentation. Selling an Oregon home can sometimes seem overwhelming and complicated. Yet there is a logical framework to the entire process. Once grasped, this makes the task far less daunting. Easy As 1-2-3 There is usually a very logical progression to […]
Selling an Oregon home can seem overwhelming and complicated, yet there is a logical series of steps to the process. Once grasped, a basic understanding of three vital home-selling factors can make a successful home sale much less daunting. Join veteran Oregon Realtor Roy Widing in this episode of the Oregon Real Estate Podcast, as he shows how selling your Oregon home can be as easy as ‘1-2-3.’
Overview: Dealing with stigmatized properties can be unforgettable for both real estate agents and their clients. Also known as ‘tainted’ real estate among other monikers, the issue of stigmatized property is important for Oregon home buyers and home sellers. ‘…that long black cloud is comin’ down, I feel like I’m knockin’ on heaven’s door…’ Bob […]
Laws vary significantly from state-to-state in how they address stigmatized properties. A stigmatized property is often a home where undesirable things may have occurred, such as a crime, or a perceived element is present, like a ghost. It’s important to realize that there are various kinds of stigmatized properties and what may bother one person may not seem so bad to another. What should Oregon home buyers and home sellers know about stigmatized properties? Find out more in this interesting episode of the Oregon Real Estate Podcast.
Oregon Real Estate Confidential: As with any occupation, there are ‘insider tips’ in real estate, too. Exactly what are these little-discussed ‘pointers’ and how can they benefit non-Realtors? Find out more in this edition of the Oregon Real Estate Podcast titled ‘5 Little-Known Oregon Real Estate ‘Insider’ Tips.
As with any occupation, there are ‘insider tips’ in real estate. Exactly what are these little-discussed pointers and how can they benefit non-Realtors? In this edition of the Oregon Real Estate Podcast, we’ll briefly note why this little-known information can be so important, then we’ll get to these 5 little known ‘insider tips.’ Hear the podcast […]
Two common real estate terms are ‘seller’s market’ and ‘buyer’s market.’ What exactly do these terms mean and how do they apply to our current Oregon real estate climate?
Two common real estate terms are ‘seller’s market’ and ‘buyer’s market.’ What exactly do these terms mean and how do they apply to our current Oregon real estate climate? First, let’s define a ‘normal’ real estate market. Terms like equilibrium and stasis describe real estate climates favoring neither buyers or sellers. For example, let’s imagine a […]
This helpful podcast from experienced Oregon Realtor Roy Widing outlines the basics of farm selling. Click on the above media player for the 8 key steps to a successful farm sale. Thinking of buying or selling an Oregon farm, ranch or rural property? Contact Roy with Certified Realty using the convenient contact form below, or […]
This helpful podcast from experienced Oregon Realtor Roy Widing outlines 8 key steps to selling your farm, ranch or other rural property.
While we’re not quite at Passenger Pigeon or Dodo Bird levels yet, among the more scarce items in Oregon right now are available homes for sale. Scarcity By The NumbersNew figures for greater Portland and Salem show no sign of Oregon’s white hot real estate market slowing down, at least yet. The inventory, or housing supply […]
For many, the sale of a home is somewhat of a mystery. What exactly is it that Realtors do to sell properties, sometimes in the dark of night? The ‘Secret’The answer is that Realtors do a lot of things, though some of them are not so well known. Today we’ll examine one of these ‘secrets’ […]
Now that Spring Break, Winter weather and ‘tax time’ are largely behind us, the forecast for Oregon real estate is sunny, indeed. Here are five key reasons for an optimistic 2016 Oregon real estate forecast, which are explained further below: 1. Interest Rates Remain Very Low2. Housing Inventory Is Very Low 3. Better Weather4. The ‘School […]
Fresh figures were just released on Oregon’s real estate market by the Regional Multiple Listing Service, or RMLS. To put the results in a nautical vernacular, we remain ‘steady as she goes.’ Portland MetroLet’s begin with greater Portland, where our backlog of home supply is unchanged at 1.8 months. This means our housing supply remains […]
A Rising Tide Raises All BoatsReal estate activity in parts of the Willamette Valley may not be an economic tsunami, like greater Portland. However, since ‘a rising tide raises all boats,’ the effect of the Portland metro’s buoyant market continues to help ensure all Oregon real estate remains afloat. The reason? For one, the sheer […]
New figures from the Regional Multiple Listing Service suggest our current hot real estate market recently transitioned from white to red. No, that’s not wine we’re talking about. Instead, we’ve gone from white hot to red hot, because home supply just increased from a shockingly low 1.2 months to a slightly less alarming 1.8 months. […]
There are many possible words to describe people, places, things and events. A recent shift in Oregon real estate brings to mind the word ‘breathtaking.’ And while that’s a term normally reserved for the Grand Canyon or certain Hollywood starlets, it also conjures the notion of astonishment, breaking fresh ground, entering a new phase, being […]
The sale of Oregon farms, ranches and similar rural properties usually has many ‘working parts.’ Yet there are seven basic steps to selling your Oregon farm. Since you won’t want to leave any money on the table, it’s best to do this right the first time. Here are those seven key steps to selling your Oregon farm, […]
Thinking about improving your credit score in the New Year? It’s a great goal, especially if you may buy a home in 2016. While the path to a better credit score can take some work, those who make an effort to improve their credit agree it’s worthwhile. Here are two very easy…and very free…steps to help […]
New figures for real estate throughout our region confirm a sustained strong Oregon real estate market.
While real estate can seem complicated, there is a logical progression helpful to selling an Oregon home and it’s truly as simple as 1-2-3. The process between buyers and sellers is routinely described as a kind of dance, so let the waltzing begin. Fundamentals There are plenty of related tasks associated with any real estate […]
Recently released housing figures confirm a continued “seller’s market” throughout the greater Portland metro area, which includes Multnomah, Clackamas, Clark, Washington and Yamhill counties. Multiple Market Factors Our sustained strong market is characterized by (1). Low inventory, (2). Short market times and (3). Rising prices. We currently have less than a two month supply of […]
This just-listed SW Portland home features nearly 2,600 square feet of living space on more than 1/3 acre, with a convenient downtown commute. Additional features include spacious rooms, a covered patio, plenty of storage space, a peaceful low traffic neighborhood, plus a detached double garage. Click here or on the below image to view the […]
So while greater Salem’s market improvement hasn’t been ‘flashy,’ it is chugging along. This translates into a lower inventory of homes, generally higher prices and shorter market times.
Perhaps even more surprising than a meager 1.6 months of housing backlog is our region’s five straight month trend of lowering home supply.
Oregon homebuyers avoid traditional lenders for many reasons and one mechanism they frequently turn to is known as seller financing.
1.9…1.8…1.7… Curious about those numbers? The ‘What’Those are greater Portland’s dwindling home supply figures over the past three months. Our area would now ‘run out of homes’ in a miniscule 1.7 months. Homesellers may describe this phenomenon as the ‘countdown to ecstasy.’ That’s because a shortage of homes boosts demand for what they’re selling. As […]
Fresh figures on our real estate market were recently released by the Regional Multiple Listing Service, RMLS. Thanks in part to our continued low inventory of homes for sale, our housing market remains strong, with price increases the rule, not the exception. At our current rate of home sales, our market would now run out […]
In this world nothing can be said to be certain, except death and taxes – Benjamin Franklin Benjamin Franklin sure seems correct about the two items noted in his well-known quote above. However, something else in this world is just about as certain and it involves a ‘secret weapon’ for homeselling success. But while this sure-fire ‘secret […]
New figures from the Regional Multiple Listing Service known as RMLS reveal an increase in home inventory throughout the Willamette Valley. Even though the housing supply has increased lately, year-to-date home prices have also risen in our region’s major markets of Portland and Salem.Portland Area Real Estate Greater Portland home inventory bumped up by almost half. […]
Predictions well into the future are difficult to make with accuracy. Consider your local weather forecast. Even given advanced technology like satellite imagery, plus wind, barometric and temperature data, weather forecasters can get it wrong…and that’s for predictions merely a week or two away! Predicting Real Estate TrendsNow imagine the difficulty in predicting real estate […]
A very telling article was recently released in a national real estate journal. In just two images, it explains why the vast majority of homesellers work with a Realtor.
Moving toward Autumn and the new school year, it’s reasonable to expect a somewhat slower pace for Oregon home sales. That’s because many, though certainly not all, 2014 homebuyers have purchased by now. Due to considerations like weather and school, a sizable number of Oregon homebuyers target September as a good date to have completed […]
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With the arrival of Spring’s beautiful weather, many Oregonians have heard someone say: “Now is an excellent time to consider placing your home on the market for sale.” However, you may wonder Why exactly is it considered such a good time to sell your Oregon property? Is it simply due to sunny skies? So if […]
Greater Portland home prices recently experienced a break in their upward trend, according to the latest report from the S&P Case-Shiller home price index. This mirrors the national real estate picture. Standard & Poor’s/Case-Shiller home price index released Tuesday shows home prices across the 20 metros surveyed dipped 0.1 percent in January, but remained 13.2 […]
A recent Realtor article suggests home sellers are now working to get a jump on the competition by placing their properties on the market ahead of Spring: The Spring selling rush may already be under way, as some home owners are already throwing their properties on the market to take advantage of rebounding home prices […]
In an interesting twist that challenges logic, Portland metro home prices are up 2.8% over the past month, while our housing inventory simultaneously jumped by nearly a month’s supply. Usually home prices soften or drop when supply increases. This counter-intuitive phenomenon highlights the ongoing demand for greater Portland area homes. It also confirms the recovery […]
Think you’re busy? The life of a professional real estate agent is, too. A recent list of vital Realtor tasks itemizes the 144 jobs top real estate agents perform when assisting sellers. These duties are wide ranging and this particular list is limited to jobs completed by Realtors for seller clients. The great thing is […]
Whether you’re with family, friends, or are alone, remembering the reason for the season can be a source of great comfort and joy. Merry Christmas!
A new report from the Regional Multiple Listing Service (RMLS) shows Portland area home prices up nicely for the year and now at 2008 levels. A significant reason for this market strength is continued low inventory of available homes for sale. Read this free new report on Portland area real estate here. Make sure to […]
New reports on Oregon home values are now available. For the greater Willamette Valley, they show a pronounced dip in Salem area prices, with a lighter decline around greater Portland. First, here’s a price graph for metro Salem: And here’s the greater Portland price graph: Inventory Explains Price Shifts Housing inventory helps to explain price […]
Fun upcoming events and surprising local housing facts are all found in the latest free edition of the Oregon Real Estate Update. Real estate information also includes average prices and market times for towns and neighborhoods throughout much of Oregon. Home Prices The average Portland area home price is now $309,200, up 14.1% from last […]
Greater Portland area home prices continued their rise as found in Case Shiller’s home price report. Portland metro home prices rose 1.6% in the last month tabulated. That was slightly down from the prior month increase of 1.9%. Over the past year, Case Shiller reports a 12.2% annual increase in Portland area home prices.
New figures suggest Portland and Salem home prices continue to rise. With unemployment still not that good, driving this phenomenon in Portland is a low 2.8 month housing supply. And while greater Salem has more than twice that housing backlog at 6.2 months of supply, Salem is still seeing a healthy 11.3% average home price […]
Recent Oregon real estate news has focused on Portland’s rising metro home prices and anemic residential inventories. So what’s the story on Salem? A Tale of Two Coffees The difference between Portland and Salem’s housing markets might best be compared to two different kinds of coffee. If the Portland area’s housing market rebound is seen […]
The latest report on greater Portland metro housing shows there is just 2.5 months of home inventory. One glance at prior figures reveals a 2.5 supply of homes is amazing small. Click here to view the entire report, including statistics on what homes are selling for in your neighborhood or city.
Here’s all you really need to know from the latest real estate report on our Portland metro housing market: ‘Portland’s real estate activity remains solid. February’s closed sales were strong—at 1,376, closed sales represented the best February since 2008.’ If you’d like to know more, keep reading and view the newest Portland real estate report […]
New figures are now available on the Portland metro real estate market. As of January of this year, the average price of Portland area homes sold has increased 5.4% to $277,000. View the complete new Portland area housing report here and check out the latest average market price on page #2.
Reversing nearly half a decade of falling home values, prices around Portland, Oregon increased 6.7% over the past year. Portland handily beat the 5.5% average increase of the twenty US cities surveyed by Standard and Poor’s in their Case-Shiller Home Price Index. Values in all but one city, New York, increased. National home prices are […]