Bear with me on these numbers: they are
meaningful to Kenai home buyers and sellers
alike. One of the most meaningful calculations The National Association of
is the Housing Affordability Index. An Index value of 100 means that the
average (actually, ‘median’) family’s income is exactly the right amount to
qualify for a typical 20% down mortgage on a median-priced home. It would be
tight, but doable.
That’s what a “100” means. In the latest report this spring, the Index across the whole
country was higher than 200! … 204.3, to be precise. Up there in
“never-before” territory. And it’s been there since January!
Yet banks are still not lining up to
approve mortgages – for the number of reasons we’ve talked about before. It’s
why some buyers and sellers have started to look for alternative ways to sell
and buy a home; and begun to look in the “for sale by owner” (“FSBO”) realm.
Kenai homes for sale by owner aren’t being sold through a licensed agent, forcing a
potential buyer or his agent to deal with the seller directly. If the home has
sat on the market for an extended period and the homeowner does not have a
mortgage to pay off, a buyer can sometimes interest the seller in owner
self-financing. In such a deal, the buyer gives his or her down payment
and installment payments directly to the seller. As anyone would guess, this
approach has its own special Pros and Cons.
The biggest Pro for the buyer is, obviously, easier financing. The biggest Pro for
a seller is the potential to make a sale where none was possible
before. As can be inferred from the Affordability Index, many people can
afford a mortgage, but cannot find a traditional lender.
But speaking of problems, there are some ‘Cons’ to consider. If the buyer stops
making payments, the seller must evict and foreclose on the property — both
time-consuming and costly procedures. A For Sale by Owner financing deal gone
sour is especially problematic if the seller is dependent on the income from
the home. And buyers need to pay attention, too. When dealing with a For Sale
by Owner transaction, there are a variety of potential legal loopholes and
title issues that traditional sale and mortgage disclosures and contracts are
specifically set up to avoid. In all
cases, it is wise to consult a trusted financial professional and attorney
before signing anything.
While a home listed For Sale by Owner with attractive terms (like owner financing)
can be attractive, having a licensed real estate professional on your side can
make all the difference. If you are
considering buying or selling on the Kenai Peninsula, I am always here to be
your real estate resource!