1. Archive

In search of seller financing

(ran HN HL HH HC editions)

Question: I enjoyed your recent article about seller financing. Although I am an active investor in rental houses, I can't find any home sellers willing to finance the sale by taking back a mortgage. Where can I find home sellers who will finance my purchase? _ Michael F.

Answer: There isn't a city in the United States where home sellers won't finance home sales. However, you've got to ask!

For example, a few years ago I bought a house from a retired couple who were "fizzbo" sellers. That means "for sale by owner." Every Sunday afternoon for months they sat out on the front lawn reading the newspaper by their "for sale by owner open house" sign. Each Sunday afternoon I'd stop by to chat. Eventually we agreed on the price. Since they only owed about $7,000 on their mortgage, I made my purchase offer with seller financing. To my surprise, they accepted without even a flinch.

The moral of this story is, in appropriate situations, home buyers must ask sellers to finance the sale. Better yet, just include the seller finance terms you want in your purchase offer. When the seller reads your offer at the kitchen table (where all great family decisions are made) and sees the monthly income, that's when the seller will decide to finance your purchase.

The best candidates for seller financing are (1) vacant houses, (2) houses that have been for sale several months, (3) with a low or zero mortgage, (4) being sold by sellers who need extra income. These sellers are often retirees.

Minimum age?

Question: A few weeks ago you ran a letter from a woman, I think she was about 50, who asked if she was too old to start selling real estate. You strongly encouraged her. But my problem is just the opposite. I am 16. My dad is a very successful commercial property salesman. I want to start selling real estate like he does just as soon as I graduate from high school. I'll be a junior in September. But he says I've got to go to college. I think that would be a waste of time. What is the minimum age for getting a real estate sales license? _ Dixon W.

Answer: Congratulations on wanting to become a real estate salesperson. Except for my job writing about real estate, selling real estate is the world's best job. You'll be your own boss with no maximum earnings, no layoffs, and no fixed work hours. Today, it's not unusual for real estate salespeople to earn $100,000 to $200,000 annually, sometimes more.

Eighteen is the minimum age to obtain your real estate sales license. Write to the real estate commissioner at the state capitol for full details. You'll need to take preparation courses for the sales license exam. It's not too early to take those classes now.

For example, at the community college where I teach Real Estate Law, I often have high school juniors and seniors in my classes. They always earn A's because they are so highly motivated.

However, I must add that I agree with your father you should go to college after high school. Get your realty license as soon as possible. Perhaps you can make a few property sales while you're in college studying business administration.



Question: Several weeks ago the sewers in our neighborhood backed up because of the city's failure to keep the sewers clear. As a result, my first floor flooded, causing about $9,500 damage. The city refuses to pay for my damages. Can I deduct this loss on my income taxes? _ Sallye R.

Answer: Yes. Your loss appears to qualify as a casualty loss tax deduction. It was "sudden, unusual and unexpected." However, it is tax deductible only to the extent it exceeds 10 percent of your adjustable gross income.

No guarantee

Question: Last August we bought an almost new house with an FHA mortgage. However, the house has many defects that the builder either refused to correct or couldn't correct. Unfortunately, the builder filed bankruptcy in March. When I contacted the FHA they refused to help. How can we get FHA to solve these problems, such as doors that don't fully close, warped flooring, plumbing that makes unusual noises and a gutter with no downspout? _ Randy T.

Answer: No mortgage lender guarantees the quality of the home being sold. Your recourse is against the home builder. If your builder provided a 10-year warranty policy from a third-party warranty company, contact that firm for assistance.


too much

Question: Who determines the sales prices of houses? I ask because my husband and I have just started looking for a home to buy. The price variations for the same basic type of house seem substantial. How can we avoid paying too much? _ Anne W.

Answer: The market value of a home is determined by recent sales prices of comparable nearby residences. Before making a purchase offer, ask your real estate agent to prepare a written CMA. That's a comparative market analysis. It includes recent sales prices of neighborhood homes, plus the asking prices of nearby comparable homes for sale.

Using the CMA, you can add and subtract value for the pros and cons of the home you want to buy as compared to the recent sales. Only after you have this information can you make a home purchase bid without offering too much.



Question: I recently tried to buy my first home. A friend gave me the name of a real estate lawyer who I consulted to prepare my purchase offer. She made the contract so complicated that the realty agent and the seller refused to accept it. My lawyer charged me $250 to prepare this contract, which resulted in no sale. As this lawyer came highly recommended, what did I do wrong? _ Stephen J.

Answer: As a lawyer, I'm sorry to say some of my fellow lawyers are "deal killers," often without intending to do so. Sometimes they try to justify their fees or impress their clients.

Home purchase contracts today are not simple. However, some lawyers make them so complicated the sellers (and their real estate agents) refuse to accept.

I'm sure you've heard the motto, "A confused mind says "no.' " That's what happened to your seller. When you find another home you want to buy, I suggest you don't go back to that lawyer. Instead, let the realty agent prepare a simple purchase contract on a preprinted fill-in-the-blanks form. Have another lawyer look it over.



Question: I moved out of my home in April. It has been listed for sale since then. Recently a friend told me my homeowner's insurance policy lapsed after I moved out. Is this true? _ Bryce C.

Answer: Not exactly. Your basic fire insurance coverage continues. But some additional coverages may lapse, such as coverage for vandalism and water damage. Your insurance agent can explain the consequences of moving out of your home.

Robert J. Bruss is a nationally syndicated columnist. Write him c/o Tribune Media Syndicate, c/o the Times, 435 N Michigan Ave., Suite 400, Chicago, IL 60611.