First, I need you to clear your thoughts of everything you thought you knew about buying a home. The traditional concepts need to go out the window, right down to what color tie you want to wear to your escrow closing when you are buying your new home, NOTHING is set in stone–for the most part.
In your NEW world, deals can be structured to your heart’s content, any which way you choose. As long as the buyer is getting what works for them, the seller is having their needs met, and as long as the agent is making money (if an agent is involved) everyone can win at this game.
Let’s examine 3 key methods for buying (or controlling) homes without banks, and in MANY cases, with ‘NO MONEY DOWN’.
3 Primary Methods of Acquisition
Method#1 – Buying with Full / Partial Owner Financing
Method#2 – Buying Subject-to the existing financing (take deed subject-to, or buying on an Installment Land Contract)
Method#3 – Controlling utilizing a Lease/Option or Lease/Purchase (i.e. Rent to Own)
Anatomy of a “Typical” Real Estate Transaction as YOU probably know it – In a Nutshell:
A Seller is asking $109,000 for a house.
Buyer (having already been preapproved for a loan) likes the home, and offers $100,000. Seller and Buyer finally agree on $103,500 as the sales price.
Assuming the home is listed with an agent, the sellers and buyers sign a Sales Agreement. Lender and Closing company work together to process the deed, title research, etc.
Lender funds the deal to the closing company/closing attorney.
Seller receives $103,500 minus real estate agent commissions, minus closing costs,etc. Buyer has a new home, and a new bank loan, which affects their credit and borrowing ability.
Agent receives a commission for bringing buyers/sellers together for the transaction.