During the recent housing downturn in the United States, one of the constant challenges for investors has been the ability to continue to invest.
Unfortunately, when it was easy to get home loans, many investors did just that. Now that credit is much, much harder to come by, they are tapped out. What makes that situation more painful is the fact that NOW is when prices and interest rates are ridiculously low.
It's a terrible feeling to know you're missing out on deals because you can't get financing. Right now, those who have cash are cleaning up. Investors with good credit scores but cash shortages are sitting on the sidelines.
There might be some good news on the horizon for investors, however. Owner financing might be making a comeback. And not just in the U.S. With tougher lending criteria by banks in Canada looming, the conditions for owner financing might be stronger there, too.
Owner financing helps investors in that you don't have to deal with a bank or other mortgage lender, possibly even avoiding an appraisor, too. If you've tried to invest in homes after 2007, you know that those parties can make it tough on a home deal.
If a seller is willing to finance the purchase themselves, though, you can avoid those headaches. The trouble is, of course, that there aren't a ton of sellers out there in position to finance the purchase themselves. I have noticed, though, that there seem to be more and more of these showing up in the multiple listing service lately.
That could be for several reasons, but the most likely is that because of the recent tax credits and low interest rates, more and more sellers came out of the woodwork. In fact, during the months leading to the expiration of the tax credits, even though there was a rush on homes and the volume of sales went up, inventory of homes on the market actually GREW. This is because sellers who were waiting decided that the expiration of the tax credit would give them an opportunity to sell their home.
The influx of more sellers is why we saw the volume of sales go up, but not home prices. There are still many homes on the market. For investors, this could be a good thing.
July and August are typically very busy home sales months. They will not be this year -- not with the buyers who jumped into the water trying to get closings before the end of June so that they could get the tax credit. The sellers who missed those buyers are going to be left holding the bag in July and August, and they are likely to be very motivated.
The guess here is that they will be very willing to negotiate and the fact that they were waiting to sell -- not forced to sell at a bad time -- makes it possible they will be in better equity positions and therefore will be better equipped to finance deals. Let's face it: Distressed sales can be good deals, but those sellers are not in a position to carry owner financing!
If you have been wanting to take advantage of some of the deals in today's market, but have not been able to qualify for a favorable loan, think about looking for owner-financing deals. All it takes is an MLS search, and you might have investment homes to pick from again. It might be your way to get back in the game.
Comments