Seller Real Estate Financing is Ideal For Retiring Baby Boomers

The last few years have been tough for the real estate market. The Great Recession and its ongoing aftermath have seen millions lose their jobs and homes. Because of short-sighted and often punitive policies by lenders and government-backed agencies, the buyer pool for the real estate market keeps shrinking. But these “outcasts” denied access to traditional financing represent viable buyers for sellers willing to consider creative financing. This will lead to a surge in seller carry-back financing, especially as Baby Boomers begin to retire and want to downsize in a slow real estate market.

Whether due to a job loss or a strategic default, when someone’s home goes into foreclosure the homeowner’s credit file is branded with a crimson “F” and they are barred from received a standard home loan for three or more years. The period for short sales is 2-3 years, assuming the required decimation of credit can be rebuilt within that time. Chapter 7 bankruptcy leads to 2+ years suspension of home-buying privileges for low-down loans backed by Fannie Mae, Freddie Mac or FHA.

Now, these unfortunate souls are not deadbeats. Most are just unlucky in that they worked in a private enterprise, an arena unshielded from Depression-level unemployment and dramatic drops in incomes. So lender attitudes and industry policies preventing them from buying a home for a number of years are really akin to “kicking them while they are down.”

But most will eventually recover and find employment or salvage their small business. Then they will be in the market for buying a home again. However, they will quickly discover that they are shunned by the institutional lenders.

Fortunately, their predicament coincides with another phenomena – the growing number of Baby Boomers that are either voluntarily or involuntarily (because of job loss) going into retirement. A good percentage of this generation wishes to downsize to reduce their expenses in retirement, but have difficulty selling their home. They are competing with a glut of foreclosures, investment properties and short sales for a small pool of qualified buyers. Despite historically low interest rates, worries about the economy and a growing number of excluded buyers makes selling a home today difficult today in many parts of the country. Many Boomers wind up just renting their home out because they can’t find a buyer.

The stars are aligning, however. Boomers and others can tap into the growing population of potential buyers who are ineligible for normal home loans by offering carry-back financing that circumvents standard lender approval criteria. Moreover, retiring Baby Boomers reap significant tax benefits from receiving payments over time instead of lump-sum profits. They can also receive a higher price or enhanced interest rate compared to current market figures. For many sellers, carry-back financing is the perfect way to supplement their retirement income with secure monthly payments at a much higher rate than that received from bonds, CDs or annuities. In the process, they will also get renters or installment buyers who are more likely to take good care of their property.

Buyers benefit too. First, they can buy a home despite being black-listed by institutional lenders. Second, they avoid many of the fees (e.g., points) that tradition lenders charge. Overall, it a much better deal than pursuing a high-rate short-term or subprime loan to buy a home.

Homeowner seller financing is nothing new. There are several universally accepted forms of carry-back financing. The two most popular are:

Lease-Purchase Option: An installment sale where the tenant has a purchase option that can be executed at under specified conditions. Typically, part of the monthly rent is applied towards the down payment. The buyer gains title to the property upon satisfying certain mutually-agreed contractual conditions.

All-Inclusive Trust Deed (AITD): Here the homeowner “wraps” existing liens within a new loan. The seller continues to be responsible for existing loans on the property, but makes a profit override on the entire total of all loans, thereby amplifying his return. The buyer gains title to the property and makes payments to the seller who in turn pays existing lenders.

In all cases of seller financing, it is the seller who decides the credit-worthiness of prospective buyers. The seller assumes the risk normally taken by an institutional lender. Sellers can be assisted in this process by credit reports, standard disclosure forms and experienced real estate professionals. In today’s economy, a recent period of income disruption and bad credit is often bookmarked by a past history of stable income and high credit scores on one end and new employment on the other. This reflects the profile of hardworking families recovering from job losses and perhaps a foreclosure or short sale. It is up to the seller to decide if he wishes to extend credit to them. To sweeten the pot, additional security such as a co-signer on the carry-back note or a lien on personal property or other real estate can also be considered.

Carry-back financing is typically secured by a trust deed or mortgage instrument on the property that allows an expedited foreclosure process to recover the seller’s asset should the buyer default on payments. Pick the right buyer and creative financing like this is very secure. Worst case, the seller gets his property back to put it on the market again. And the initial deal can be structured to ensure that the seller has sufficient funds to cover costs for this contingency.

The Different Forms Of Small Business Finance

Any small business owner in operation today is actually an incredible and solid form of business ownership as well as being an integral part of the growth and health of the economy. Quite often, when public policy and economic decision making is undergone, they look at small businesses to see how they are faring and able to withstand the various different amounts of strain and tensions that the economy is being placed under. An incredible stress of any business is the financing options available to them which requires the knowledge of the various types of small business finance.

With any level of business financing, there are actually an incredible amount of options available that provide an incredible source of financing overall. Businesses must keep a very close eye on their options at all times in order to remain competitive and thing strategically regarding how they are able to move forward. Thus, understanding what all options are at all times is definitely a crucial element in this process.

Truly, at all times, any small business must maintain a solid grip on their cash flow. Being a good cash manage is often crucial for maintaining a level of financial well being as well as not having to depend as much on financing at all. Thus, this should always be a foundational business model process.

Debt financing is actually an incredible common form of small business finance available. Basically, this is where the finance company purchases the debt acquired by the business in exchange for repayment with interest. This is often performed at early stages of any small business.

For those that need more cash flow, business loans are actually often a very common source of business financing. This is basically much like a personal loan and requires a solid credit standing as well as an incredible amount of potential. This should actually be something that is reserved for the harshest of economic times for any business.

Investment in any business is also another incredibly common form of small business finance. Basically, this is something that involves a great deal of word or mouth and branding before it is offered to any company. Most businesses use this investment cash for expansion and upgrades to help the business grow and run efficiently over time.

Another form of business finance is through equity finance. Most often, this type of funding requires a decent level of credit standing as well as a very solid forecast of growth and potential to attract equity financiers. In this process, the business owner relinquishes a level of their ownership in the company in exchange for a set amount of financing that requires repayment and constant reporting to the equity finance company.

Finally, venture capital is often used as business finance for those wishing to take their business to the next level. This is acquired when a business is beginning the process of going public and wishing to sell themselves to the market. This funding is often used to increase the overall financial outlook of the company to make it more attractive.

Why Early-Stage Startup Companies Should Hire a Lawyer

Many startup companies believe that they do not need a lawyer to help them with their business dealings. In the early stages, this may be true. However, as time goes on and your company grows, you will find yourself in situations where it is necessary to hire a business lawyer and begin to understand all the many benefits that come with hiring a lawyer for your legal needs.

The most straightforward approach to avoid any future legal issues is to employ a startup lawyer who is well-versed in your state’s company regulations and best practices. In addition, working with an attorney can help you better understand small company law. So, how can a startup lawyer help you in ensuring that your company’s launch runs smoothly?

They Know What’s Best for You

Lawyers that have experience with startups usually have worked in prestigious law firms, and as general counsel for significant corporations.

Their strategy creates more efficient, responsive, and, ultimately, more successful solutions – relies heavily on this high degree of broad legal and commercial knowledge.

They prioritize learning about a clients’ businesses and interests and obtaining the necessary outcomes as quickly as feasible.

Also, they provide an insider’s viewpoint and an intelligent methodology to produce agile, creative solutions for their clients, based on their many years of expertise as attorneys and experience dealing with corporations.

They Contribute to the Increase in the Value of Your Business

Startup attorneys help represent a wide range of entrepreneurs, operating companies, venture capital firms, and financiers in the education, fashion, finance, health care, internet, social media, technology, real estate, and television sectors.

They specialize in mergers and acquisitions as well as working with companies that have newly entered a market. They also can manage real estate, securities offerings, and SEC compliance, technology transactions, financing, employment, entertainment and media, and commercial contracts, among other things.

Focusing on success must include delivering the highest levels of representation in resolving the legal and business difficulties confronting clients now, tomorrow, and in the future, based on an unwavering dedication to the firm’s fundamental principles of quality, responsiveness, and business-centric service.

Wrapping Up

All in all, introducing a startup business can be overwhelming. You’re already charged with a host of responsibilities in which you’re untrained as a business owner. Legal problems are notoriously difficult to solve, and interpreting “legalese” is sometimes required. Experienced business lawyers know these complexities and can help you navigate them to avoid stumbling blocks.

Although many company owners wait until the last minute to deal with legal issues, they would benefit or profit greatly from hiring an experienced startup lawyer even before they begin. Reputable startup lawyers can give essential legal guidance, assist entrepreneurs in avoiding legal hazards, and improve their prospects of becoming a successful company.