Housing Prices Continue To Slump

According to RealEstateJournal.com housing prices are falling faster than any point during the last 16 years and there is no end in sight.

For buyers that should be a good thing. Prices always come back and getting into a home at the bottom is the ideal situation. If you plan on staying in the home for any length of time than getting in now, or soon, is a great opportunity. Prices may be continuing to fall but most analysts and experts are pointing to a recovery, or at least leveling off, to begin in 08.

If you, as a buyer looking to purchase a home in an area were you plan on living for the next 5-10 years than the short term down does not need to be an issue for you. Prices have already fallen considerably and will be leveling off soon. Once we get there prices will start going up again. The real estate market has these ups and downs constantly and while more and more people are not buying homes, prices are continuing to sag this is an excellent chance to get the home of your dreams at a great price before the market picks back up and buyers come out in force trying to grab all the great deals on beautiful homes. This process inevitably pushes home prices up and by then you could be paying 20%+ more for a home than you can right now.

For sellers this is obviously a very bad situation to be trying to sell your home in. There is pushing around a year's worth of inventory on the market in many areas around the country and it looks like, at least in the near term, it is only going to get worse. That leaves sellers in a bad position that only want to sell conventionally.

What options do sellers have to sell a home quickly in this market? Well there are a few things one can do to sell their home quickly. It really depends on the situation the seller is in and what they are willing to do. The two options I would choose from if I was a seller in this market would be:

• Seller Finance all or a portion of the sale.
• Drastically reduce price to encourage a quick sale.

Of course the first may not be for everyone. If the seller is willing to wait for all, or a portion, of the sales price with a balloon due in 1-5 years than it is possible to get your entire asking price or more. The other option is going to require the seller to undercut the market and price his/her home much cheaper than the competition for similar homes. Going this route the seller will end up with much less.

Seller-Carry Financing in General

Before reviewing the NARS Equity Holding Trust™ transfer system (NEHTrust™), let's take a look at some older, time-worn seller-financing concepts and their many pitfalls and downsides.

Straight Lease - A rental for a specific period of time. No benefits other than use and occupancy. Always at the landlords whims and mercy. Far more costly than owning due to absence of income tax deductions and equity build-up

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Lease Option (L/O) - A unilateral agreement to buy at some future time, under pre-arrangedd terms if the tenant has the money and credit wherewithal to do so at the exercise date.

So what's wrong with a L/O? They've been done for years. The L/O violates a lender's due-on-sale admonitions (See. 12USC1701-j-3). An unscrupulous optioner can change the terms on a whim relative to the option price and rent credits, requiring extensive legal action to rectify. If the Optionis recorded, the lender's due-on-sale admonitions are brought to ber and the house and the option could be lost; if not recorded there is no guarantee the property wouldn't/couldn't be sold or leased to someone else without the optionee's knowledge. Optioners can, and often do, refuse to honor their commitments in the face of increasing values (again, forcing expensive and tenuous litigation). Very few Lease Options are ever consummated, thereby most often wasting one's Option Fee and Rent Credit payments.

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Contract for Deed (CFD) - The CF is essentially a "Lay Away Plan." The property's legal title is given to the buyer only after all debt has been retired: ie., there is no legal ownership until the property is fully paid for.

And the problems are...? The CFD violates a lender's due-on-sale clause; and (either) parties' creditor liens, lawsuits, judgments, marital dispute litigation, and tax liens will attach to the property. And...the death of either party throws the prperty into a decend's probate (re. posthumous creditor claims.)

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The "Wrap" All Inclusive Mortgage - In a "Wrap" a seller creates a mortgage loan that is equal to or greater than the existing loan/s on the property. Then from the buyer's monthly payment to the seller the mortgage payment/s is/are made...thereby leaving the seller a positive cash flow.

So, what's wrong with that? Violation of the Due-on-Sale Clause; the seller's, suits, judgments, marital litigation, probate and tax liens attach to the property; and the death of the seller puts the entire property in probate. There IS, however, a better way to accomplish the same objectives without the risks.

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The Equity Share (ES) - A shared-ownership of real estate, wherein two or more parties hold title as tenants-in-common. Typically, one party makes the down payment while the other lives in the property and makes the monthly payments for an equal share in profits upon sale.

So, and the problem is...? Another due-on-sale violation. The other party's liens, lawsuits, judgments, marital dissolution litigation, tax liens and affairs of probate attach to the property...thereby negatively affecting the surviving party's ownership interests. Once again, the objectives of equity sharing can be safely accomplished without the risks and downsides by use of the Equity Holding Trust Transfer™.

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The "Subject-To" - The Subject-To is an informal assumption of mortgage payments subject to a loan's existing terms, with or without the lender's knowledge and/or permission.

And the problem...? "Subject-To" is basically a generic term that can be applied to any of the above schemes. And like all the above, an unauthorized Subject-To violates the lender's due-on-sale clause. The Subject-To clouds the property's clarity of title; it invites disastrous dissension and frequent litigation between parties. And...any party's business, personal and legal actions attach to the property: thereby seriously negatively affecting the interests of the other party/ies. The solution follows with an explanation of the NARS Equity Holding Trust Transfer™.

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The Equity Holding Land Trust Transfer System (EHT) - Protection with virtually none of the downsides, but all of the benefits and advantages of Seller-Assisted-Financing. With the EHT, a seller's property is vested with a 3rd party trustee in a land trust. Income tax benefits can be conveyed to a co-beneficiary/buyer. In that the trustee is the property owner, no party can act independently of the other. No party can jeopardize title. The property is shielded from public view,and is well insulated from lawsuits, creditor judgments, tax liens, bankruptcy, marital dispute and probate on behalf of either (any) party to the arrangement. And...the lenders' "due-on-sale" clause is not violated.

Problems? As is common with ANY financing method, a seller (trust grantor) could "stir up trouble (although without effect)." The property could lose value over the term of the agreement, necessitating a future sale at a loss, or requiring mutual agreement for an extension of the agreement; without proper caution one's real estate could fall into disrepair. No negative exists, however, that would not be in common with any form of home mortgage financing.

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WHEW! That is a screen full. If you made it through all that, congrats! As you can see the EHTrust Transfer is far superior and without most of the downfalls of any other seller-assisted financing.

What is it that I do?

Starting Monday, Oct. 15th I am going to be posting a few times a day as I run across interesting tidbits of information, post about the details of a transaction I am currently working on, tips for buyers and sellers, info for real estate professionals (Realtors, Mortgage Brokers, and so on) and my thoughts on Real Estate and related areas. However, I thought it would only be appropriate to give a description of what it is I do exactly so, lets get on with it already!

All-State Housing Solutions is based in Davison, MI. We work with buyers, sellers, Realtors, Mortgage Brokers, investors and others in the Real Estate field throughout the U.S. however. Where we excel is putting together transactions when a seller needs his property out of his hair sooner rather than later and would-be buyers who either can't or don't want to get traditional financing.

We are willing to give a seller Full Price (or More!) for his property if he is willing to hold any equity he may have in it for a couple of years at which point it will be paid in full. During our agreement with the seller there will be no landlord responsibilities, no maintenance, repairs or upkeep to worry about and we even take care of the taxes and insurance. We will also provide the sellers new Lender with documentation allowing them to give 100% credit for the payment being covered instead of the typical 60-75% for a rental. We are able to do so through a tried, true, safe and legal (although vastly underutilized) process called the EHTrust Transfer. (We will talk more about it in a later post, for now get an overview at the link provided). Going this route is beneficial to any seller who wants to get out of the responsibility of making the payments and upkeep immediately. It is also probably the best option for those with little or no equity in their property and even up-side-down. Anyone, regardless of their situation be it behind on their payments or what have you, if they are willing to carry their equity for a few short years we are willing to work with them. We also purchase homes outright as well but in order to do so we need to get a good price.

Would-be buyers get all the benefits of homeownership without the necessity of a new loan, no down payment and no credit check. We qualify someone automatically if they can cover 3 payments plus the closing costs. After a couple years of on time payments we can qualify roughly 90% of those in our houses for a refinance loan instead of a new mortgage. The reason we require 3 payments is we place 2 in a contingency fund with our 3rd party bill paying service to ensure on time payments and 1 for the first months payment. The closing costs are the costs of the transaction which we will get into in a later post. At the end of our agreement we also refund the full amount of the closing costs and the payments from the contingency fund.

So what are the benefits of homeownership that one is able to obtain without traditional financing? During the term of our agreement you are allowed the income tax deductions for mortgage interest and taxes as well as a share of the equity build up through appreciation and principle pay down. Since our transactions are structured the way they are you are also able to claim more exemptions on your W-4 at work, possibly bring home hundreds of dollars more each month (I am not qualified to give tax advice so please speak to a CPA) All that is required is the payments made on time and that the property is refinanced within a couple years.

Now that is a rather general overview of what we do for buyers and sellers. Most of our transactions also involve Realtors and other real estate professionals. For the mean time if you want more information on how we are able to provide the benefits we do the "buyers" and "sellers" please visit North American Real Estate Services for an overview of the property transfer process we utilize. As the days pass we will get into the details.

Have a great rest of the weekend and I look forward to sharing myself with anyone who may be reading.

Eric West