Jim Scheller - ABR, SRS, e-Pro, GRI

Before we get to the actual balloon payment, I want to talk about amortization schedules. In my contract with you, I'm going to insist on a regular amortization the way a bank would. None of that "Every $800 payment will be $200 towards the house and $600 interest"* stuff for me. That works out for you as the Buyer much better than a regular amortization schedule would, so I'm not going for it. Besides, regular amortization schedules are standard for contracts for deeds. With every payment you make the amount of principal paid will go up while the amount of interest will go down. (This is a link to my favorite amortization calculator, and you can use it to see how amortization works if you're not already familiar with the concept.)

[*However, if I was in your position as the Buyer, I'd definitely suggest that kind of payment arrangement to the Seller! Worth a shot.]

So what is a balloon payment, anyway? A balloon payment is a single payment when all the rest of the money owed on the contract is owed all at once. Yep, every penny.

So the date the balloon payment is due becomes a major deadline for you. By the time the balloon payment gets here, two or three years from now (or whatever length of time we agreed on) you will have to get your hands on a large enough amount of money to pay me off. Usually, the only way to do that is to refinance your home loan, typically with a bank or other commercial lender. So between now and then you had better be working on getting your credit situation in order! That's actually one of two main reasons to sell on a contract for deed:

· you get some time to fix whatever credit problems you might have so you can get a regular mortgage with a regular bank, and

· it's easier to refinance your home (the house you are buying from me is your house, just like anyone else who buys a house with regular financing) once you own it and have made payments for a while than it is to finance it in the first place.

So if you're careful with your credit you should be able to refinance when the time comes. If you can't, you are in danger of losing the house altogether, but that's a subject for another time.

Any questions on balloon payments?

Next up: your interest rate.

In Minnesota, contracts for deed are called contracts for deed, obviously, but elsewhere they might be called land contracts or installment sale contracts.

So, your credit isn't the greatest, and you've heard a contract for deed might be a good idea, but you don't really know what they're about. To illustrate, let's pretend you will be buying my house on a contract for deed.

Instead of you having a loan with a bank, I will be your banker instead. Why would I do that? First, I want to sell this house that you want to buy. That's a good thing. The down side is that your credit is bad enough that you can't get a loan from a bank. So that means if I want to sell you my house, I have to provide the financing for you until you can get a loan from a bank. Usually there will be a balloon payment in two, three, four or five years, although it could be anything. I could even give you a contract that lasts thirty years, just like a regular bank, although I wouldn't. I need to have you out of my life long before that. Nothing personal, it's just that I'm not a bank, and I don't want to be. That's why there will be a balloon payment when you buy from me (or most other Sellers).

Next: the balloon payment.

(I originally posted this entry on www.MankatoHomesOnline.com March 16, 2009)

The other day I decided that winter was over. (Just after we had the last cold front move out, that is.) Now we're seeing sixty degree days and a nice south wind to dry things out. It won't be long before the farmers can get out into their fields. Life is good.

Along with the temperature, it seems buyers' collective interest is heating up. We've had lots of people come to open houses, and I've had buyers call me to look at places they've been eyeing for a while online. One set even coming from California! (Don't you love the internets?)

So, what does that mean for you?

If you're a buyer, get out there NOW, because there are a lot of you starting to look at Mankato real estate. Real estate outside Mankato, too. (Check out my $5,000 Buyer Savings Guarantee.)

If you're a seller, you might want to put your home on the market sooner than later to catch some of this springtime enthusiasm. Buyers love real estate in the spring. (Don't forget, I have an Easy-Exit Listing Agreement, and some of the best online marketing around.)

And this morning I saw my first robin! But the person I was showing a house to told me that, actually, robins don't really go anywhere during the winter, that they just hang out in sloughs with lots of tall grass. He said he sees them in his backyard all winter long.

I guess I'm not sure what I think about that. Robins heralding spring is pretty traditional, after all.

Maybe I'll google <robins in winter> and see what I can find out. I'll let you know.

When it comes to the price attached to a home for sale, buyers and sellers are looking for opposite things. Sellers want to sell their home for as much money as possible. Buyers want to pay as little as possible for their new home. Who wins? It depends on the state of the market: how many homes are available, and how many buyers are looking? Market saturation is the term relating those two numbers.

An average market is considered to be one in which there are roughly three to six months worth of homes on the market. That means that if no more homes came on the market, it would take three to six months for the Buyers who are looking to buy all the homes available. The market saturation is three to six months.

Much less than that and you have a Seller's market, in which Sellers generally have more say in a home's sale price than Buyers. An example of an extreme Seller's market was in the early 2000's, when homes in some parts of the country (including some in the Twin Cities) sold so quickly that in some cases a Seller had multiple offers before their home hit the MLS. At that time the market saturation was probably three weeks or less.

Let's talk Mankato real estate now. The Mankato/North Mankato real estate market is about as far from a Seller's market as it can be. At the moment we have a little over 12 months worth of inventory on our hands. This is a serious Buyer's market, and looks to stay that way for a while.

Happily spring is on the way, and we should see more closings in the coming months than we saw in the last few. That will help with our numbers.

If you want to take advantage, give me a call.

Spring is coming, and now is the time to give you home's chances of selling a shot in the arm.

A study done recently by the University of Michigan showed that increasing a home's "Curb Appeal" increased home value by anywhere from six to eleven percent! That's huge.

Here's a good way to look at it: Let's say you have home you're thinking of selling, and it's worth $200,000 in today's market. You know the yard and the front of the house could look better, but you never knew it could mean so much to your pocketbook. You call me up, I give you a couple of ideas and the names of good contractors, and you find you'd need to spend $10,000 to get this work done (assuming you don't do any of the work yourself to save even more) and make the home look absolutely tops from the street. (And on the web, where this can be your home's biggest draw.)

Is it worth it? If you just increased your home's value by the six percent minimum, that's in increase in the eventual sales price of $12,000, meaning you picked up $2,000. If you top out at the eleven percent maximum, you gained an extra $22,000 in sales price, netting you an extra $12,000. So if you stand to make $2,000 at worst, and pick up $12,000 at best, why wouldn't you?

And here's another point: if you do nothing, your home may sell quickly or it might not, no matter how much you market it. In this kind of market, it's not unusual for a home owner to have to take a price cut eventually, sometimes for much more than $10,000. Doesn't it make more sense, now that warmer weather is coming, to spend some money now instead of taking a price cut (or two or three) after the home's been on the market for a few months?

You decide to give it a shot: you bite the bullet, but you don't want to go crazy. You decide to spend $7,500. Your home still looks a ton better than it did before, and I capture that in my photos and video of you home (which I put on youTube and link everywhere...). Because of this, even though you increased the list price from $199,900 to $219,900, your home sells within 30 days for $209,000.

You didn't quite make the six percent threshold, but you did clear $1,500 more than you spent on the upgrade, and your Mankato home sold quickly to boot!

I'd say it's worth it. BUT, you need to take advantage of good marketing to make it happen; if Buyers don't see your home, it will have been a waste of time and money. That's where I come in. I make sure Mankato Buyers see your home, and lots of them.

Call today to find out about my extensive web marketing reach. And think about upgrading your home's curb appeal! It can pay off.