Oceanfront Seller Financing

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The year was 2009 and the New Jersey shore like many areas was devastated by the banking crisis.

Personally, I had boxed myself into a corner where I had too much real estate and too little cash.

The old saying CASH IS KING is very true this year.

I had five South New Jersey condo units that were summer rentals and the market for selling them was not hot.

My investment process was buy and hold for one to three years. When the market slowed in 2008, my process crashed.

I am a pretty prayerful person but prayer wasn't doing a lot for me either.

I determined that things were getting desperate and I had to do something before my credit lines dried up. I decided that I had to bite the bullet and sell one of my two big properties. I already had them both (plus two others) on the market but it was now time to drop the prices. I did and the response was totally not encouraging. Time continued to pass one month, and then two. The buying season of April/May came and went with barely a showing.

The summer had started and it was usually hard to show units in the summer. Unfortunately, this summer was no exception so I developed a three prong approach. I would drop the price to what I believed to be the bottom of the market, determined that I would offer seller financing and set out a defined prayer regimen to help with the acceleration of the process.

Here is what happened:

Property One

Well, with three irons in the fire there was talk about a deal and I got a buyer for my property in North Wildwood. Was I ever happy.

As we neared settlement, it became clear that a sleeping problem was to be dealt with now. When I bought the two big properties, I used a credit line which was secured by the two big properties. What I did not understand was that to sell one, I had to pay off the credit line. WOW! I did the reassessment and I had to proceed with the sale–no option for otherwise. So I left the settlement table with lunch money.

Interestingly enough, the buyer was a long time renter of the unit who had wanted to buy for years but never could swing it financially because the prices were too high. When she heard the talk about a deal, she thought about it and she talked to her mother. Her mother agreed to help plug the gap.

The offer of seller financing did not help put this deal together but it did help to get the deal going and that is what sold the property. The property was sold for cash.

Property Two

Well you can imagine that even though I appreciate the sale, I was still dismayed at my financial situation. So I focused on the second property and the seller financing on that. I asked the realtor to really try and get the message out.

It worked. I got an offer and because of the seller financing it happened so fast that I could barely keep up. Preliminary conversations and a verbal deal had formed before the final agreement.

From the day I signed the agreement of sale with changes to the day of settlement was one week.

When I sat down at the settlement table, I did not have an executed agreement of sale.

The settlement process was long for a simple deal.

The prior few days had been problematic in the legal document area because an attorney had to custom make the financial documentation. Neither the real estate professional for the buyer or seller had ever participated in a seller financing transaction. The closing officer was the head of the title company so he had to keep checking with his staff as to what they had created.

Interestingly enough, the buyer was a long time renter of the unit who had wanted to buy for years but never could swing it financially because the prices were too high and so forth. When he heard the talk about a deal, he realized he could do it. Seller financing was the hook.

In closing, I invite you to look at things differently and put the real estate dream back to work. The American Dream that is. Seller financing is a powerful tool. Consider it!

Mike Wanner
Philadelphia, PA

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