If you read last week's column (and let's assume for the sake of my ego that you did) I talked about the fact that the Piedmont market has fallen very little in value, relative to other years. This isn't to say prices haven't softened (they have) but not as much as the mainstream media would have you believe. Let me repeat last week's message: third quarter values in Piedmont sales were off by only 1.059%!
So why hasn't my neighbor's beautiful home sold yet? The difference in today's market is the lack of credit in the marketplace (the lender's ability to make loans) and the scarcity of options for jumbo loans (those loans over the super conforming rate of $729,000*). Sales requiring a loan larger than $729,000 are going to find it much tougher to fund than sales at the lower end of the scale. While jumbo loans are still available (hunting them down may prove profitable) - they take longer to process, require more money down, have stricter guidelines, and are currently short-term products only.
This is where seller financing comes into play. If you are in the position to carry back some part, or better yet, ALL of the loan to the buyer, you have just increased your buyer pool dramatically!
Because you've just made it possible for the well-qualified buyer to secure your home absent the traditional lender! Congratulations, you are now the bank and your home becomes the collateral for the loan. (This isn't a new concept, it's a reemerging one!)
That's interesting but I don't need a loan; I have CASH to spend!
Fantastic - you should be well-rewarded in the current marketplace. This is the time to take advantage of those homes at the high-end of the market as they will have far less competition at the table and will likely sell for less than they would have a few short years ago.
I also have a house to sell? Can I come out whole on my end and capture a discount on the other?
That depends. How long have you owned the home? If it is less than five years, the straight answer is - not likely.
Remember that markets are relative. When asking for a haircut on one end, you should expect the Buyer of your house to demand a similar shave on your end as well. However, the substantial savings on the UP leg and its increased appreciation capacity over the long term, should make up for any loss experienced on the selling end now.
Buying UP in a down market may be the best time to realize your biggest gain - especially if you have owned your current home for several years. *Please note that the super-conforming rate is scheduled to be reset to $625,000 come January 1, 2009. IF you have a Refi on your loan coming due in 2009, you may want to take advantage of lower interest rates and the higher conforming limit NOW. You'll need to do this no later than December 1, 2008 in order to get the loan processed in time!
Please speak to your banker or an experienced mortgage broker.
Julie Gardner, has been writing The Perspective for 15 years and has published more than 500 essays. She is also a frequent contributor to the Sound Off column in the Real Estate section of The San Francisco Chronicle.