Real Estate Pros
What You Should Know When Talking to an Investor
You’re a professional, and you take seriously your responsibility to act in the best interest of your client. As you should! Part of your role includes vetting potential buyers and their means for financing your seller’s property. Will this offer benefit your seller, and is the buyer qualified to deliver on their offer?
The first time you talk to an investor about Creative Financing options, you may have one or all of the concerns we’ve listed below.
Asking questions and due diligence are appropriate; here are the concerns we typically encounter and short explanations under each. We have produced additional resources, and we’re happy to provide more in-depth materials if you want to learn more.
Our goal is to provide solutions that give you more control over the transaction with wider options for your seller while protecting (if not increasing) your gross commission income.
Each of these is expanded elsewhere with more in-depth explanations; just click on any topic to read more.
Whether they are planning to buy soon or down the road, we want to see your sellers succeed and continue as homeowners. If they encounter any issues in underwriting, because of a recent sale, we can usually resolve debt-to-income issues for their next mortgage by contacting that lender directly to provide satisfactory documentation. If they waited a while before purchasing their next property, the process is even simpler, because there is a precedent and paper trail showing that someone else is already servicing that debt.
Mortgage lenders care that monthly payments are made, and after the first year, they rarely care who makes them. Many mortgage covenants do include language like “due on sale” or what are called acceleration clauses. These give them the right to require a loan balance be paid sooner than the original term under certain conditions. But if payments are being made, it’s in their best business interest to continue holding the debt as it is. And so, these clauses are rarely exercised while payments are made on time. In the event that they are, we have several solutions available. You can read more on those in our expanded discussion here if you’re interested.
What if a year from now we get abducted by aliens and don’t make the payments as agreed? We write terms and contracts with provisions that benefit and protect your seller with simple and effective recourse. Often your seller would walk away with all of the money paid so far AND the property to re-sell.
Unlike institutional financing contracts, your seller would not be required to return any equity to us in excess of our outstanding debt. They would keep everything, and they could turn around and sell the property again.
Creative Financing is legal in all 50 states. Some methods may require different structuring or documentation in your state, but assigning debts, property ownership, and contracts is very common. In fact, the entire real estate and mortgage industry is built on a wide variety of ownership structures and the sale or transfer of contracts.
We value your expertise, and we want you to be paid what you’re worth. We work with you to see that your commission is protected, and often increased; sometimes doubled!
Our goal is to build lasting partnerships that reach far beyond a single transaction. We want relationships with agents who want to work with us because the solution we offer is positive and profitable for you and your clients.
You’re the market expert; our goal is to support you by offering solutions to present to your sellers when it makes sense. You’re right to take seriously your role to guide your clients faithfully to the best option for them, and you should be paid for your expertise; they’re lucky to have you!
We want to provide you with quality information and resources. You can read more of our content, or simply reach out and start a conversation to learn more.
