There are different ways to structure real estate transactions that involve seller financing to benefit all parties.  Of course the seller has concerns of protecting their property and the need for regular repayment.  The following scenario explores this option in detail.

You know that your local market has many rental properties in the inventory and you have found one that meets your needs.  You will be purchasing from a seller who is greatly motivated because the property has been on the market longer than a year.  The property has an existing long-term fixed rate first mortgage with a balance of just $100,000.  Your plan is to buy the property, rent it out and hold onto it as a long-term return on investment property.  You know that the home is worth about $150,000 and the seller has it priced at a discount of $120,000.

The offer is as follows.  You want to put $5,000 in cash as a down payment but also allow the seller to keep the title in their name with their first mortgage with only a balance of $100,000.  The seller must also consent to taking a second lien loan for the remaining $15,000.  This transaction may seem like it only benefits the buyer and the seller is left with all the risk.  However due to the current lack of home sales in your area, the seller is motivated to continue the arrangement of the sales price, your down payment amount, and also is okay with you taking over the monthly payment for the first lien mortgage because they want to see the property sold in the long run.  What bothers most sellers about this type of transaction and what makes it risky for them is that you are not assuming the existing loan.  It still remains in their name but the title work protects them for your default.  Still there is the concern of the loan remaining in their name and the $15,000 second lien is also risky for them should you fall into hard times but the goal of the sold property remains a common interest for all parties.

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The real estate market and the mortgage industry has turned upside down as our economy is spiraling downward which we haven't seen seen in decades.  In this depressed economy, some of our loans on our homes exceed the actual value on the market.  The prices of residential real estate are so depressed, hitting an all time low since 1980 that some experts are forecasting that we are headed into a recession.

 Just this last February, it was noted that the prices were dropping at such an alarming rate that the slump did not look as if it was easing up but instead gaining speed. The Standard & Poors/Case-Shiller housing index for prices using over 20 large cities in the U.S. dropped almost 13% in one month in comparison to last years figures.  A good number of these 20 cities are stating that it is a decline they have not seen in over 30 years.

Developers are filing bankruptcy and homes have been left uncompleted and unoccupied and even those companies that were looked upon as the more established builders have stopped building or slowed down to a survival crawl.

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