Sales Clinic: Expand Your Market with Seller Financing

Creative homeselling: There are alternatives to traditional mortgages that may mean higher sales prices.

December 1, 1999

Are there any creative ways to sell a home that will maximize the salesperson's value?
Timothy Baker, RE/MAX Affiliates, Naperville, Illinois

If you want to be a top salesperson, you always have to be on the lookout for new and creative ideas to set yourself apart from the pack.

One creative thing I like to do on some listings is to discuss the benefits of seller financing. It's known by different names in different states, such as land contract, deed for trust, and trust deed, but the concept is the same. Instead of getting a mortgage, the buyer signs a contract agreeing to make regular payments directly to the seller.

This is a great option for sellers who own their homes or investment properties free and clear. In essence, it turns the deal into an annuity. Say the seller finances a $250,000 home at 10 percent interest amortized over 20 years. That works out to payments of about $2,400 a month or $30,000 a year over the life of the loan. And if, for whatever reason, the seller needs to exit the contract early, there are a number of companies that specialize in buying up this kind of paper.

Another point in seller financing’s favor: because more buyers usually qualify for this type of deal, the house will often command a higher sales price. One thing to remember, however: make sure the sellers have a real estate attorney with a proven track record in this area.

Does real estate still provide an excellent investment opportunity?
Allan Domb, Allan Domb Real Estate, Philadelphia, Pennsylvania

Without a doubt. The places to find investment properties include: rentals, bank foreclosures, VA and HUD foreclosures, bank REOs, and tax sales.

How many times have you come across a property that was way undervalued and said to yourself, "If I only had the money, I'd buy it?" Well, why not go out and line up the money now so that the next time you see one of these home runs you're ready to step up to the plate?

Gather some general data about properties in your neighborhood or town and the return they could generate and use that information to convince your bank to give you a line of credit.

Other potential financing sources:

  • Find an investor with deep pockets and offer to do all of the legwork and split the profits with him if he provides the investment capital.
  • Borrow money against your home.
  • Create a limited partnership where friends and
  • family each invest a few thousand dollars to get you started.

It'll be one of the best moves you make in your real estate career.

When you have personality clash with a possible buyer or seller, how do you make it work?
W. James Johnston, Coldwell Banker Landmark, Pocatello, Idaho

It's a fact of life that, as a salesperson, you will at times run into buyers and sellers with whom you simply don't click. When this happens, the first thing to do is admit it. The second thing is to assign them to an assistant and then stay out of the way. Your ego may be a little bruised, but at least your team will still make a commission on the deal.

If you don't have an assistant, consider referring the customer to another salesperson. A 20 percent to 30 percent referral fee is better than nothing. Of course, sometimes customers are so impossible that referring them to anybody--even your worst enemy---seems cruel. When this happens, the best thing to do is to “fire” them.

I know this might sound a little extreme, but in the long run you'll be better off. One problem customer can use up twice as much of your time as ten good customers. When you fire a customer, don't look at it as a lost commission. View it as cutting your unproductive time to put more effort toward prospecting and better servicing the customers with whom you do get along.

Roberts, of Ralph R. Roberts Real Estate Inc., is a Warren, Mich.-based practitioner. He's been in the real estate business for more than 20 years and has sold about 500 homes per year for the past five years. He's also author of the book Walk Like a Giant, Sell Like a Madman (New York: Harper Business, 1997).

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