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Here is an e-mail I received from a Seller in California. I have received similar letters in the past and decided to post this one on this site since it may be relevant to many visitors:

"..... We simply (at this point anyway) are interested in selling our house as quickly and painlessly as possible. We definitely fit into your profile of 'motivated sellers'. We bought this house in late 1992 as our primary residence and lived there until 1995. We needed to move because of my wife's employment opportunity and to care for a sick relative. We tried to sell the house using a Realtor. Because of the sagging market and low equity we were unsuccessful. When we absolutely had to move we decided to rent the house out - with a negative monthly rent to mortgage situation.

The tenants have been great and we have encountered no problems. We even thought the tenants might buy the house at the end of the lease. They reconsidered and have decided to look for a house with four bedrooms.

The current situation is this. We absolutely must sell the house. We can no longer afford the negative cash flow every month and we will never be able to buy where we currently live in this kind of situation. We still don't have a lot of equity and the market has not greatly improved. If we list the house with a Realtor, after commissions, we will most likely have to come up with out of pocket money. Another thing that we cannot currently afford. Plus that assumes a sale will happen quickly and painlessly.

That brings me to a service like yours. I will be totally honest with you and tell you my bottom line here and now. I would be completely happy with a sale that allows us to walk away for just our loan balance and no costs to us.

I realize we do have some equity and that's wherein my main questions are. What exactly is "selling on terms"? I think I understand that it involves lending the buyers money directly to keep the costs down. Can that money be from the equity difference? Also, how is that money repaid? How long does it take for the transaction to take place? What can be done with the renters in the meantime?

.....We're very interested and would like to get this behind us so we can move on......"

Phil S., CA

Let's start with the renters. What type of renters do you have, how long is their lease, and how much you are receiving each month in rent. I cannot give you a solid answer if you have a year's lease with the tenants. I wish I could answer what to do with the tenants -- I need to know about their lease. As you know from my website, I stay away from renters as much as I can.

"Selling on terms" means that the Seller creates acceptable terms for the buyer taking into consideration market conditions and allows the buyer to buy the property without going through "regular" channels like banks or mortgage companies. The buyer is buying the property without qualifying, no credit check, and no income verification. However, it depends on the seller and market conditions how much the seller wants to check the buyer out. Sometimes a credit report can look like a disaster but you could have very nice people looking for a home. People file bankruptcy (Chapter 7) for many reasons -- medical bills, illness, divorce, business failure, losing a job, or (as I show on one of my examples) parents co-sign for car loans for kids who failed to make payments, and, regardless the parents' credit was perfect, these two repossessions showed up on their credit reports. I usually get all this information just from talking to people. People who just discharged a Chapter 7 bankruptcy are wonderful candidates for the following reasons: They cannot file another chapter 7 for 7 years and the length of the contract will be less than that. Usually people in trouble are humble. They don't give you any trouble; they are happy that someone gave them another chance in life. And there is the good feeling you get (at least I do) knowing you helped someone in need. Money isn't everything.

Let's take one more problem area: a job. There are many, many people who make a lot of money but don't show it all on their income taxes - especially waiters, waitresses, and other people who work for tips. They cannot qualify according to the bank, but they make enough money to make the payments!

You have to make a judgment call. The wrong decision could create problems. There is always a risk in making money. The more you make, the greater the risk.

There is one solution I can offer you. We could partner 50/50 on the sale of the property. I will help you structure the deal, create ads, create all the paperwork, and make sure all loose ends are covered. You would have to find a title/escrow company or an attorney to handle the transaction, place the ads in the right newspaper, and show the property. We would split all profits and all expenses 50/50.

Although I don't know your market, here is an example of what we could do:

• Try to get $7,950 as a down payment.
• Sell the property for $144,950.
• Interest rate on the new note of 8.75%, monthly P&I payment of $1,078, estimated PITI of $1331.

A Contract for Sale is an actual sale regardless that title will not change for the duration of the contract. As we explained in Students Ask Mr. Real Estate the deeds are pre-signed and held in escrow until the new buyers refinance. Yes, you would be on title during that time.

If you want to be completely free of the property, then I suggest to list the house with a good company and, if there is no activity, keep reducing the selling price in $5,000 increments every 30 days until the house is sold. If you have to go out of pocket, there is nothing you can do about it. But, when the property is sold, you have no more ties to it. Our company only buys houses on a Contract for Sale, usually for a duration of 5 years. We re-sell the property to a buyer who cannot qualify now, but will be able to qualify in 5 years to refinance.

I tried to give you the best advice on "dumping" the house. I know you won't like that idea, but you don't want to keep any house on the market without lowering the price if there is no activity. In other words, you cannot sell the house at the price you want, in your desired time frame, get all the equity out, be free and clear of the house, and don't come out of pocket if the market conditions in your area don't allow you to do it. This is where many people make a mistake. Real estate, like anything else, is subject to supply and demand of your particular market. (This is why people turn to creative financing - the extra money they are able to make compensates for the other inconveniences.)

Sometimes it is cheaper to dump the house versus continuing to make monthly payments, having the house vacant and subject to vandalism. Usually a vacant home deteriorates, sometimes beyond salability - the grass dies, the plants die, and vacant homes take on a unique and uninviting smell.

Sometimes the choices we have to make are not the best choices.

I know you want to talk to me on the phone. So do 100 other people every day. I thought the Internet was going to be easy work with little demand on my time. Boy, was I wrong! I have never worked so hard in my life! Especially since I created a new website, Discount Marketplace, (please click on the link) where we have access to over 30,000 items for sale. There's something there for everyone. There goes my semi-retirement!

For more questions and answers regarding real estate and creative financing, please visit Click here for Students Ask Mr. Real Estate.

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