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    Torrance Homeowners Use Creativity to Aid in Property Sales During the Weak Market

    From our perspective in Torrance (South Bay) the crash of the real estate market appears to be nowhere near over.

    While this information may be unsettling, keep in mind that market crashes are not a new problem. When the South Bay housing market crumbled in the 1980’s, it caused s great deal of anxiety. The unfavorable situation forced investors to use creative and original strategies to sell homes and make it through the crash.

    Here are some tips to help those who need to sell their property for whatever reason recoup as much value as possible. Savy folks in Torrance (homeowners and Real Estate Agents) are already putting many of these tactics to good use.

    Lesson from 80’s

    In the 1980’s down market, consumers looking to sell their property found it beneficial to finance the closing costs that the buyer normally has to pay. This has the potential to be a worthwhile strategy, but it does not always work in practice as it does in principle. With certain loans, there are restrictions regarding how much the seller can concede to the buyer. These restrictions are common from companies such as Freddie Mac and Fannie Mae.

    However, we have used this strategy successfully for numerous buyers in Torrance and the South Bay. The trick is to keep the closing costs to a minimum and write the contract in such a way to be acceptable to whomever is providing the loan on the Torrance homes.

    • These loans are popular, especially with first time homebuyers, because they require a reduced down payment. As a result, a seller cannot concede more than 3% of the total sale price if the down payment is 1/10th of the mortgage or less.
    • In this situation, you might be required to formulate an even craftier plan to sell your home. During the previous market fall, sellers would raise the asking price. As ineffective as this may seem on the surface, it is a strategy for aiding the buyer with closing costs.
      • Here is a simple analysis of how the plan functions.

        • After a negotiated price with a buyer is agreed upon, the price rises by several percentage points.
        • This extra money goes right back to the buyer during the closing process. For example, a $100,000 dollar home that is increased by 3% equals $3,000.
        • This $3,000 will cover the buyer’s closing cost, and the buyer takes a mortgage of $103,000.
        • This strategy is a way buyers without a lot of extra money and sellers with tight restrictions can still complete a transaction.

    If this situation is to occur and be effective, the property has to be appraised and valued at the steeper price in order to receive the correct amount in the mortgage loan. By using this option for covering closing costs, the buyer accepts the fact that they will have to make a slightly increased monthly mortgage payment.

    A large number of home sellers hesitate and often do not concede anything, attempting to receive as much value as they possibly can, regardless of interest in the property or time it has been on the market. However, a property that is not sold and remains on the selling block for an extended period of time is only causing financial losses that could have been avoided by some early price tweaks and create thinking and marketing.

     

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    Posted on June 13th, 2008 by Ryan Rockwood
    Posted in Torrance


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