Seller Financing in the LBI Real Estate Market

Long Beach Island Real Estate and Seller Financing

Seller Financing in the LBI Real Estate Market
Seller Financing in the LBI Real Estate Market

Long Beach Island Real Estate

Home sales in the LBI real estate market have been improving. 2014 was one of the best years for overall activity we have seen in some time. Some of this has to do with Hurricane Sandy and the massive improvements made to Long Beach Island since the stormy impact. There has been a boom of new construction with high-value homes on almost every street. This has helped to increase land value as well, as buyers look for more and more investment opportunities. This, coupled with infrastructure upgrades and improving economy nationwide has helped to make Long Beach Island an interesting place for real estate investment. While most deals in the LBI real estate market are all cash transactions or with relatively easy financing, there are opportunities for seller financing in the LBI real estate market. These opportunities can be beneficial for both buyer and seller in their transaction.

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Seller Financing in the LBI Real Estate Market

There are a few things that seller financing both buyers and sellers should know. They are:

  • Seller financing is one of the least understood aspects of the LBI real estate market
  • Seller financing carries risks for both buyer and seller, however there are ways to minimize these risks
  • Seller financing can help to increase the total net proceeds realized by seller for their transaction in the Long Beach Island real estate market

Many people falsely assume that seller financing is a last-ditch effort to get an otherwise unqualified buyer into a home. While this may be true in certain situations, it is certainly not true for all cases. The LBI real estate market is somewhat unique in that the advantages of building a new home can create an opportunity to realize almost instant equity in the property. It is very possible to purchase a home and build a new structure with the end product being worth about 30% to 40% more than the upfront cost construction. The downside to this scenario is that financing for construction loans is very difficult and very expensive. It is not so difficult to find a buyer who has the credit, assets, and down payment for part of the transaction however is difficult to find a bank willing to take on the perceived risk of building a new home. A clever way around this is through owner financing. If a seller is willing to finance, for a short time, the purchase of the land, this allows the buyer to free up capital to build a new home. Once that new home is complete, it can be refinanced and the seller can be paid off. Typically this process will take one to two years.

The major risk for any seller financing situation on Long Beach Island has to do with the buyer defaulting. Like any investment, risks are inherent part of the transaction. The good news is, there are ways to minimize that risk on the part of the seller. A good real estate attorney can offer ways to help limit that risk including deed in lieu filed at the closing.

Seller financing can easily increase the total net proceeds paid to a seller. With the buyer assuming the property, the seller will see an instant down payment made to them. In addition they will be earning interest on the loan paid each month. Lastly, the expenses of owning a home, for example taxes and insurance, are now the responsibility of the buyer. This creates a very favorable situation for the seller where they had agreed upon sales price, receive part of their payment upfront, earn interest on the principal balance, and eliminated their care costs.

Seller Financing any LBI Real Estate Market

It is important to understand seller financing is not a one-size-fits-all scenario. There are certain legal risks and monetary risks that must be understood upfront, and these can only be assessed by a qualified attorney. In addition, seller financing will typically only be allowed when there is no other mortgage or lien on the property. If a property currently has a mortgage, it is highly unlikely that the bank will allow the second mortgage to be filed on the property. For more information about the LBI real estate market for seller financing in the LBI real estate market, contact me and I will respond right away.

By : Nathan Colmer | The Van Dyk Group

Cell: 609-290-4293 | Office: 800-222-0131 | ncolmer@vandykgroup.com

www.BuyLBI.com

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