Sandi Davidson

Today I received an email from a prospect inquiring about seller financed homes and it went like this:

I have good credit and the 5/% down, also the aproved loan from the Bank, but I am looking for better deal thant the one the bank offer me, and lower price on a 3/2/2 on a place that I may like it.
Please let me know your prices, and your interest rate, and all yours condition.

Here is my emailed response, which I followed with a call:

Often Seller Financed homes sell for higher than homes with conventional financing. This is because they have creative terms that makes these homes available to buyers who are unable to obtain a bank loan. The other thing that is common is for the Seller Financed rates to be higher than bank rates. For example the Seller Financed homes I’ve seen recently have rates anywhere from 6.5% to 10%, whereas the bank rate for a 30 year fixed rate mortgage is hovering 4.5% at the moment.

If your credit is good, and you are able to secure a bank loan, that is most likely going to be the best deal for you out there right now. I would caution you not to wait too long for the “big deal” for two reasons: With talk of the US credit rating being downgraded there is a very strong likelihood that mortgage rates will increase significantly. The second reason is that home prices in our area seen to have stabilized, and more than that listing prices and selling prices are on the climb, having increased 5% in July. Because Florida was ahead of the market in the real estate melt down, most suggest that it has already hit bottom. If you are looking for a better deal than those already out there, you may miss out entirely.

If you are serious about bidding on a home, and want to have a shot at having an offer accepted, your Realtor can help you put together the best initial offer, based on what is going on in the marketplace currently.

Good luck in your home search. Let me know if there is anything else I can do to help you.

What struck me most about this exchange is that with mortgage rates as low as they are, and with home prices where they are...some people like the gentleman above are still holding out..waiting for the "big deal". Turns out the prospect did not want to pay the bank fees, appraisal fees and so on...hoping to save $2000.00 in the process. What he failed to understand was that in X number of years, when his seller financed home loan balloons..he is still going to have to secure a bank loan. What the interest will be in X years is anyone's guess.

Per Bankrate, the interest rates for home loans are increasing as a direct result of the ongoing debt crisis talks going on in Washington. Less important is the need to raise the debt ceiling...no one really thinks we are going to default on our debt payments in spite of all the comments intended to scare the public and motivate political rivals.

Regardless of what happens with the debt ceiling most analyists agree it is a foregone conclusion that our credit rating will be lowered from the AAA status we now enjoy. This is more detrimental to cosumers and homebuyers as it will cost us more to borrow. This is a direct reflection on our governments inability to rein in our debt. Most economists agree that with no movement on tackling our debt, the US will lose the confidence of investors. Once that happens, it will costs banks more to borrow money and that "benefit" will be passed on to us, the consumers in the form of higher interest rates and inflation.

Several weeks back my mom's adopted Shih Tzu "Spikey" passed away. He was a mess when she picked him up, so much so that she thought twice about keeping him. Matted, covered with fleas, smelly, two badly damaged eyes, and personality that was less than friendly. We advised mom to give him time, afterall he was found abandoned, and clearly mistreated...who knows what abuse he went through. He has reason to be distrustful.

I won't say that Spikey ended up being the most affectionate or loving dog, but he came such a long way since that first impression. He still barked at everything, but he no longer flinched or growled at you when you went to pick him up. He learned what treats were, and kisses, and what steak tasted like. He had a terrific four year with a loving owner and left a hole in my mom's life and home.

Last week she sent me photos of a Shih Tzu at the Lee County Domestic Animal Services Shelter, and asked that I go check him out. In the meantime another Shih Tzu arrived, and when I got to the shelter "Blue" now known as "Lucky" caught my eye. He had been adopted from the same shelter this past April, only to be abandoned by his owners in Cape Coral, who apparently also abandoned there home, and shut off all utilities...other victims of the housing crisis. Neighbors found Lucky running around on the street.

What a good dog. His plight and abandonments have done little to dampen his friendliness or his enthusiasum. He came with me right away, and bonded right away with my two Boston Terriers, Buster and Piggy. Mom came down with her female Shih Tzu, Shugah, and the two of them immediatey hit it off...good!

I am so happy and proud of my mom for giving another orphan a good home. We were heartbroken to see so many good dogs and cats at the shelter, and though the shelter is lovely and the staff terrific you could see the hope in the eyes of each dog as you walked by their cage...begging for your attention.

Dexter, a 4 year old Old English Bulldog caught my eye...and it is with bittersweet feelings that I see he is no longer available. I am happy that great looking guy found his forever home and hope the other wonderful dogs and cats at the shelter do the same.

Per Trulia the average price per sq ft of homes sold in Lehigh Acres, Florida went up 5.26% from the prior quarter. Moreover of the 180 homes sold in the last 60 days, the average listing price went up .26%.

Lehigh Acres, Florida, long the poster child of the down turn in the housing market is showing signs of life. Buyers and investors waiting for the next bottom to fall out, may find themselves missing an opportunity to score a home in this quiet SW Florida community while the stars are aligned.

Mortgage rates are still low, something that cannot be garaunteed, and is likely to change with the threat of a reduced credit rating for the US and the increase in lending costs promised as a result.

Even if home prices were to decrease further, and indications suggest they are not, you would need a significant decrease to offset the additional cost of one percentage point in interest!

Ted C. Jones said it in his blog post on April 2, 2009 and it still applies today:

Postponing a Home Purchase Waiting for Home Values to Decline Further May Price You Out of the Market

Primary residence buyers, Florida vacation home buyers and real estate investors alike are on the fence about property purchasing, assuming that the market has not hit bottom and the prices will continue to go down. It is the prospect of further price erosion and the need for a "deal" that keeps many on the sidelines instead of entering home ownership, in spite of the fact that the interest rates are lowest since Freddie Mac started statisical analysis in 1971.

Mr Jones says "While further price declines may be realized, I believe the likelihood of rising interest rates makes purchasing now a better option than waiting for further potential value declines. Simply stated, there is a greater possibility of interest rate increases than potential value declines. Even with the price decline, the interest rate increase may result in the buyer no longer being able to qualify for a loan on a home they wish to purchase for which they qualify today. Despite facing a potential in declining home values, now may be a better time to buy."

A simple mathematic formula demonstrates the significant cost savings at today's low interest rates vs. the sharp reality that rates may go up in the very near future:

Assume a loan today of $100,000 with a 30 year fixed rate at 5%. At these terms a buyer would have a monthly P&I payment of $537. If the prices of the home decreases 5% (and the loan amount as well), but the interest rates go up 1% point then the buyer will be paying $570/mo.

it is important for buyers not assume that even if home prices do decline further that they are not necessarily going to get that the best deal.