Welcome to the largest Sequim Real Estate Blog with over 1,900 articles.
10 Jul 2012
What if you could sell your home for more in this recession? Is there a way to sell your home and substantially increase your net proceeds? Yes there is if you own your home free and clear. Not very many people own their home free and clear of any mortgage today, but for those who do, you have a gigantic advantage, and if you are not desperate to use the cash proceeds to survive now, you have a gold mine in your home. Let me show you how this works. Glance at this graphic below, and see if you can interpret it, and then read the explanation below.
If you own your home free and clear, you can sell it on a private contract. In other words, you can carry the paper, collect the monthly payments from the buyer, and earn interest on the unpaid balance like a bank, only you can earn even more. A privately held mortgage is entitled to earn a slightly higher interest rate than a commercial mortgage company. If interest rates on a fixed rate mortgage amortized over 30 years is 4%, you can charge 5% or 6% on a private contract.
In the above example, the left side shows what happens when you sell your home for cash (or when the buyer gets a loan). If the sales price is $205,000, and you re-invest those proceeds in a safe 10-year CD with Chase Bank at their current rate of 2%, at the end of 20 years you would have $305,820.
Now if you sell your home for more on a private contract using a promissory note and a deed of trust, you can raise the price for the buyer who may not qualify for a loan but has $25,000 for a down payment and a sufficient monthly income. A buyer who cannot qualify for a loan but is still an excellent buyer is willing to pay more to own a home. They know they will be building equity and that the interest is deductible. But even more important, they will get to own their own home, and that is worth a lot.
In the right side of the graphic above, you can see the same home can fetch a price of $275,000, and with a down payment of $25,000 from the buyer. As the seller you would receive monthly payments over 20 years with 5% on the unpaid balance for a total of $420,794. This is $115,000 more than if you sold it for cash. This is how you sell your home for more even in this recession.
This makes more than just financial sense. If you sell your home for cash, where are you going to safely invest the money in today’s crazy market? In the stock market? In bonds? In 2% CDs? If you sell your home on a private contract to a qualified buyer, your investment is secured by that real estate. There’s no better security. Your capital is not at risk as it would be in the stock market, and if your buyer defaults, you actually end up making more money because you get to keep the down payment, all the payments the buyer made, and you can foreclose and resell the home to another buyer. This is a great way to invest your money in your own real estate and get an excellent return. Now you know how to sell your home for more.
Possibly Related Posts: