Why Aren’t More Americans Buying Homes?

According to Gallup, only about 62% of Americans own their homes, which is the lowest percentage of home ownership since they started collecting data in 2001 (though AOL states that this percentage is actually the lowest in 50 years).

Oddly, a survey conducted by an independent real estate valuation firm found that, despite the recent chaos in the housing market just a short few years ago, 3 out of 4 of Americans still want to own a home and consider home ownership a major life goal.

According to the survey, non-home owners under the age of 30 are more positive about home ownership than older buyers, showing 47% consider home ownership very important compared to just 41% of the respondents over age 30.

However, data from NeighborWorks America reports that only about 42% of renters are considering buying a home in the foreseeable future

If so few people own their homes yet demand is high, why aren’t more people buying homes?

Why Aren’t More People Buying Houses?

Why aren’t more people buying houses?

The number one culprit is the perceived complexity of the home buying process.

Not only is purchasing a home the biggest investment most people will make, but it’s much more of a process than purchasing anything else. The only other type of transaction that people can equate to buying a house is purchasing a car, but when you buy a car, you don’t need to be a contractual expert, provide option periods, contingency clauses, addendums, etc…, purchase multiple types of insurance and hire the bevy of specialists to inspect & survey prior to purchase.

Understandably, this long, complicated, drawn out process does prevent people from making the jump from renter (which takes about 5 minutes to fill out an agreement) to home owner.

Other factors, according to AOL, include:

Didn’t think they could afford a neighborhood they’d like to live in (20%)
Couldn’t afford the down payments (17%)
Lack of Job Security (14%)
Bad Credit (13%)

To summarize, 75% of renters have a desire to be homeowners (high demand), yet are discouraged by the complexity involved in buying a house, a high 20% down payment, poor credit, and lack of a w2 or traditional job. Therefore, if, as a real estate professional, you could offer a solutions to this problem, do you think you could increase your sales, revenue and overall profits?

Solving problems is essential to having a successful business, and real estate professionals who educate themselves on how to sell houses to ”unloanable’ buyers will see great success for the next few years.

So how does one solve this problem?

How to Sell Homes to Unloanable Buyers

The key to selling homes to ‘unloanable’ buyers is to have homes available for sale with owner financing.

Owner financing is when the seller agrees to sell the property in exchange for a note where the buyer promises to pay back according to the agreed upon terms and pledges the property as collateral for the loan. Since only two parties are involved, the terms are generally more flexible and the closings much quicker than with a conventional loan.

This flexibility allows for the two parties to negotiate items like down payment and allows for the seller to determine credit score & down payment qualifications.

Imagine how many more sales you can close if the closing process is quick & simple and only lasts a few days?

How to Find Homes To Sell With Owner Financing?

The key to selling homes to ‘unloanable’ buyers is to find home owners that are distressed. A distressed homeowner is anyone who can’t sell their house by traditional ways (using a Realtor). The 3 main reasons that sellers can’t sell through a Realtor would be:

1) House is not in sellable condition and seller can’t afford to make required repairs

2) Seller has little, no, or even negative equity and can’t afford to pay the difference between the loan amount & sales price nor can they afford to pay the 7-10% closing costs associated with a traditional sale

3) Seller needs to sell fast and can’t afford to wait the average of 6 months for the house to sell and ultimately close

Example of a Distressed Seller

Too many times people associate distressed homeowners as people who had homes they couldn’t afford. This isn’t the case. Bad things happen to good people. Individuals who lived life the right way and qualified for homes ran into difficult times during the housing crisis due to divorce, medical, job loss, death, etc… Here’s an example of a scenario I’d run across in my business during course of the 1,200 real estate transactions I’ve performed.

Let’s say that Susan is a single Mom who has been going through a tough financial time. She bought a house when she was married & had a good job in 2005.

Unfortunately, during the past several years, life has changed. Susan lost her husband and went from a dual income family to a single income household. Susan has also changed jobs and isn’t making as much money as she did in the past. She has no money in her saving and has had to take on a second job to make ends meet. After losing her husband, she wants to be a part of her son’s life, but can’t do that if she’s working two jobs.

If she can sell her house, she can move into an apartment that will save her $800/month and allow her to work only one job. Her commute will be cut down and the overall quality of her life will improve.

Unfortunately, Susan needs to sign a lease with the apartment complex and move in by the end of the month. She can’t afford to keep the house and get the apartment. She knows nothing about nor has any interest in becoming a landlady.

To make matters worse, Susan owes $200k on a house that is currently worth $200k. If she sells through a Realtor, she’d have to pay $15k in closing costs… money she doesn’t have. The Realtor suggested a short sale, but Susan doesn’t want to damage her credit. Due to her lack of equity, Susan has an ‘unsellable’ house by traditional and conventional standards.

What does Susan do?

The Assignment Of Mortgage Payments Solution

What is AMPS?

To sum up the assignment of mortgage payments system (AMPS) in one sentence, it allows you to sell ‘unsellable’ homes to ‘unloanable’ buyers quickly at market price.

In this situation, the educated investor can purchase the house subject to the existing financing remaining in place until buyer refinances. The seller keeps the mortgage in her name and gives the deed to the new buyer until the buyer can refinance. The investor can then find an ‘unloanable’ buyer, negotiate terms, and create a new note.

The ‘win’ for the seller is that her house is sold fast, payments are being paid by someone else, and she didn’t have to come out of pocket to pay closing costs. She avoided foreclosure and can move on with her life.

The ‘win’ for the buyer is that they were able to purchase a home fast and negotiate the terms of the downpayment to best fit their needs.

The ‘win’ for the investor is that they were able to solve the problems for two customers and profit from the transaction.

Overall, there is a win for the community as well as a short sale or foreclosure was avoided, thus preventing property value from decreasing.