Little, or no Equity?

Have you no equity due to only living in your home for a short time? Are you having trouble making your mortgage repayments and need to sell but can't because of not enough equity? Have you refinanced out what equity you once had to find that you are now unable to sell your property for what the debt is? Did you purchase at the peak of the market and now property prices have dropped?

The "low or no equity" situation is the most common that we come across when speaking with sellers. In most cases, the homeowner has already tried to sell through their local real estate agent with no sale eventuating. In order to cover the agent's commissions, advertising costs and additional closing costs, the seller finds that they have had to increase the sales price.

Since the sales price has been increased, the likelihood of selling is reduced. Even if the property does sell, what little equity the home owner has is eaten away by the real estate agent's commission and closing costs.

Some real estate agents may even refuse to list your house because there isn't enough equity to pay their commissions!

You don't have to give away your equity to a real estate agent, no matter how little or much you have!

Using a flexible term sale to sell your property brings answers to these problems faced by many sellers. The price needed or hoping for is achieved with no costs at all to the seller such as real estate agent commissions or advertising fees. The home owners hard earned equity stays where it belongs - with the home owner. 

A flexible terms sale helps home owners in all types of situations, whether it's a divorce, job transfer, behind on repayments, little or no equity, up-sizing or downsizing. Flexible terms sales bring creative solutions to real estate problems that traditional real estate cannot find answers for.

A Rent to Buy home buyer will be prepared to pay the price that the seller is needing in return for flexible terms (provided the price is not unreasonable). The flexible terms that this Rent to Buy home buyer will be looking for will be a delayed settlement of anywhere usually between 2 to 7 years (sometimes longer). Once Contracts have exchanged, the Rent to Buy buyer will usually take over the seller's monthly mortgage repayments and all outgoings on the property - just as if it were their own home. The price that the seller was needing/hoping for is documented into the legal paperwork and cannot be changed. The title of the property remains in the sellers name until the end of the term agreed upon when the Rent to Buy buyers settle. The seller's bank or lender is not paid out in full until this time, at the end of the delayed settlement.

Think of all the advantages this has for both sides:

The seller receives the price that he/she is needing or hoping to get. There are no real estate agent fees or commissions for the seller to pay. The sellers monthly mortgage repayments are met each month as well as all outgoings for the property. The title of the property remains in the sellers name for the period of the term (giving the seller extra security). The seller really has nothing to lose, all his problems are fixed with this one buyer. If in the unlikely event, the buy defaults on payments, the seller is only back to square one (so they are no worse off).

The Rent to Buy buyer also has great advantages in a Rent to Buy deal. The seller is offering the buyer flexible terms which is allowing them to enter into home ownership without meeting the banks criteria (at the moment). The Rent to Buy buyer may not have any deposit saved, or they may have some markings on their credit rating which is preventing them from obtaining a bank loan. The buyer may even be bankrupt. By receiving flexible terms from the seller, these buyers can use time to their advantage by entering into a home purchase without requiring the banks assistance until the end of the term. By the time the end of the term arrives, the buyer should have corrected whatever the issues were that he/she had and be able to present themselves to the bank to obtain finance.

The Rent to Buy buyer has locked him/herself into a home at the price of the property at the beginning of the term. Any capital growth that accumulates during the term becomes the new Rent to Buy buyers equity (if the buyer had no deposit saved, this equity would become the deposit at the end of the term when approaching the bank for finance). 

So as you can see, for a seller who has more debt on his property than what the market is currently paying (little to no equity), and also considering the large commissions the seller would lose when dealing with a real estate agent, a flexible terms sale on his/her property solves his/her selling problems.

There are many, many renters out in the marketplace that earn very good incomes to sustain a mortgage but due to circumstances are unable to obtain a bank loan. A flexible terms sale solves this for the renter and allows them to step into home ownership while correcting whatever it is that is preventing them from getting a bank loan.

Our DIY Rent to Buy Houses manual explains all these Rent to Buy deal types in full, including steps for buyers to implement their very own Rent to Buy home purchase.