Due to the recent decline in home values across the country, millions of homeowners seem to be in a big dilemma. Selling a home that is worth less than the mortgage loan balance is forcing sellers to make tough decisions. Do you sell at market prices and pay the difference in cash to the lender? Is a short sale or bankruptcy a cure or do they make things worse? And what about getting away from home and debt? What are the chances of getting another home?
For some, hearing a real estate agent suggest using personal funds to sell a home at a loss is like hearing fingernails scratching a chalkboard. No home salesperson wants to hear that. Many resort to trying to negotiate a short sale with their lender; that is, the property is sold for less than what is owed with bank approval rather than a foreclosure scenario. It sounds good on paper, but most lenders do not approve of short sales, and even if they do, a short sale can have a negative impact on a good credit rating. And with bankruptcy or abandonment, credit is definitely destroyed along with the ability to qualify for a home loan for years to come.
Every home seller who is upside-down on their mortgage faces a multitude of challenges; or so they think. What they don’t realize is that there is a very simple solution that has been around for hundreds of years in times of easy credit or no credit. Allowing someone to take over a mortgage payment has always been a valuable option for home buyers and sellers in the past because it easily solves the problem of transferring property rights when money is tight and the economy is depressed.
But because home values have fallen so dramatically in the last five years, some home buyers may not want to inherit a mortgage that is so heavy on a home’s value. From a home seller’s perspective, selling a home to a total stranger where the loan balance is not attractive, worrying about the new owner leaving when the going gets tough is a very real possibility. The home seller could be forced to foreclose on the new owner while ruining his own credit in the process of late mortgage payments.
A different approach to “take over the payment” can be used to mitigate any of the concerns mentioned above. Equity sharing can bring relief and security to both the seller and the buyer. It should be remembered that real estate values are cyclical. They go down but they always come back up during good times. If property values are weak today, tomorrow we will undoubtedly experience a boom. The share spread can weather the storm until residential real estate values return a property to a profitable investment.
This is how an equity stake can produce tremendous results in any economy.
1. The home seller places title to your property in a special escrow account without transfer to the home buyer.
2. Using a very special “Co-Beneficiary” arrangement, the home buyer and seller treat the property as a real estate company and both become equity “partners”.
3. The home buyer makes a mutually agreed monetary “contribution” to this agreement and, as an occupant, is treated as a resident property manager with all home ownership rights and financial rewards and responsibilities assumed by a homeowner. real. only on a “rent with option to buy” regime.
4. Over time, as the property increases in value and as the property is sold, the home buyer and seller may share the equitable proceeds from the profitable sale of the property or the resident property manager may purchase. the property at fair market value less its equity.
Time is the great healer in a poor housing market, and a share capital agreement is a perfect remedy when time is needed for recovery. If it takes longer for the property’s value to rise above the mortgage loan balance, so be it. Equity sharing is a great tool for the homeowner because you can find someone to take over a payment, even if more is owed on the loan than the value of the home. It’s also a great way for someone with good jobs but bad credit to get their dream home without qualifying. The share spread is safe for all parties and is a perfect solution for moving real estate in a recessionary economy.