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Alternative Financing May Play a Significant Role in Coming Months

Whether you are buying or selling a home, our current mortgage market will most likely impact your transaction in a big way. With lenders struggling and loan criteria tightening, many buyers that could have previously obtained a conventional home loan may be out of luck. And for sellers, the pool of buyers is certainly smaller than it was due to the mortgage market and many other factors.

I believe that alternative financing will play a more significant role in real estate in the coming months. In fact many segments of the market have already been affected in such a way that alternative financing is becoming commonplace. What exactly is alternative financing? To put it simply, alternative financing enables buyers and sellers to get real estate deals completed without using conventional methods of financing for all or part of a transaction. “Creative” or “Non-Traditional” financing are other terms used to describe alternative financing. In our current market buyers, sellers, mortgage brokers and agents who understand and utilize alternative financing methods will be significantly better off than those who don’t.

Should your agent and mortgage broker be familiar with how to structure deals in a non-traditional manner? Absolutely, and the truth is that most of them don’t understand and utilize alternative financing because they haven’t had to over the last decade or more. Having the knowledge and skills to get creative with financing and other aspects of real estate is critical to making deals happen in our current market.

If you are a seller what would you do if you found out a couple days before closing that your buyer couldn’t qualify for the loan? Lenders are jittery in our current market and it is not unheard of for them to change their criteria and deny a loan at the last minute. In fact it happens more than you may think. What would your real estate agent recommend that you do? Well, unfortunately many agents would assume (without asking critical questions in an attempt to find a solution in many cases) that the deal had fallen apart because the buyer was unable to meet the lender’s requirements. They would likely recommend cutting ties with that particular buyer and putting the home back on the market immediately, or they might suggest giving the buyer an extension in order to apply for a loan with a different lender. But if you have an agent that is creative and familiar with the numerous alternative financing techniques available, they may be able to determine a short or long term solution to the problem, save the deal and get it closed for you!

What if you are a buyer in our current market who has been self employed for less than two years or you recently changed jobs and are working in a different field than you had previously? Or maybe you are a buyer with bad credit and you have very minimal savings for a down payment? In both of these scenarios many mortgage brokers and agents would assume you couldn’t qualify to buy a home in this market because the “sub-prime” mortgage market is under water. Once again, an agent who has experience and knowledge with alternative financing techniques will be able to assist you in buying a home.

There are many other common scenarios that could occur for both buyers and sellers in regards to this issue. The bottom line is that you need an agent who understands how to get creative in order to make sure your goals are accomplished in the most efficient way possible. Please feel free to call or e-mail us anytime with any real estate questions you may have!

Copyright © 2007 Todd Gifford