Sell at 95% to 120% of value |
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Problem - Little or No Equity There are 2 main reasons for a House sale in todays market:
"EVERY PROPERTY HAS A VALUE WHICH IS SPLIT BETWEEN THE CASH PART AND THE DEBT PART"
e.g. a 200K property property with 140K mortgage has 60K cash part/and 140K debt part With this in mind, if there is little or no equity in the property, then you might find that you can not sell this property on the open market because:
Solution If you are selling to escape the debt or because your losing money each month on the property as you can't afford the payments then there is a simple principle:
For example A typical property is worth £200k in the UK. It might have been worth 240K in 2007. (its value dropped 20% since then). The debt on the property is now 195K, which was 80% of the value in 2007. Now the debt is 97.5% of the value. To sell it will cost you 4K in estate agent fees and maybe 5K in mortgage redemption payment, and then all your other legal costs on top. You'd need to invest a further 10K+ to sell this property. YOU COULD SELL THIS PROPERTY AT BETWEEN 95% AND 120% OF ITS PRICE WITHOUT ANY COSTS TO YOU WOULD THAT NOT BE A GREAT SOLUTION? How to sell at 95% to 120% of Value - 4 Sample Methods To do this we have a number of methods available. Some are briefly described below. The longer the payment term the higher the potential price that you will receive. Lease Option A Lease Option is where the Investor can immediately start paying your mortgage debt and all of the other costs and responsibilities associated with the ownership and running of the property. E.g. maintenance, service charges, insurance. It is essentially 2 legal pieces of paper: The Lease part uses a normal AST Residential lease like a tenancy agreement which is extended for the term. The Option part is the right to purchase the property at a pre-agreed price over a period of time e.g. 2 to 18 years, but typically 3 to 8 years. Benefits:
Rent to Own This is where the Investor sub leases the lease to a tenant that is interested in buying the property in the future. It is the same as the Lease Option only the Tenant is given the right to exercise a purchase price during the agreed timeframe which would mirror the Lease Option term. Instalment Contracts/Vendor Financing This is where purchase contracts are exchanged up front. An instalment contract is a contract of sale - just 1 agreement. The buyer moves in on exchange of contracts. The seller (yourself) provides the financing using your current mortgage. The house may be sold or refinanced at any time during the contract period by the purchaser. Again, these contracts could run from 2 to 18 years. In practice, most of these contracts are completed in 2 to 3 years. Deferred Payments There are basically 2 parts:
Who would benefit from these solutions? The following 6 situations:
An illustration of a lease option: Your property is on the market for say £150,000 and your outstanding mortgage is £120,000. While your monthly mortgage payments are £900. You will need to reduce the asking price to probably £120,000 to attract any interest. This means you will not make any profit at all from the sale and it could have taken you 6-12 months to sell the property! Meanwhile, you have continued to pay your mortgage. With a lease option, you could agree to grant us an option to buy your property for £135,000 within say the next 5 years. Meanwhile, we will also take over your mortgage payment of £900 a month. Should we choose to exercise the option to buy your property anytime within the option period, you will make £15,000 after paying off your mortgage of £120,000. If this purchase happened after 2 years, then you would have saved a further 24 months of £900 mortgage payments which is £21,600. Therefore, you could see that by taking on a lease option deal on a property that you are asking for £150,000, you are potentially £36,600 better off! Please note: more than 90% of options will be exercised by us. Our aim is between 95% and 100%.
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