Buying And Selling a Home During a Credit Crunch -
Copyright (c) 2009 Cory Shrader
Liberty Home Sellers
As President Obama is taking office, many people who had hoped to
buy a home in 2008 or 2009 are stressing as to whether a bank
will be found, which will finance a home purchase.
The TARP bill (Troubled Assets Relief Program of 2008) was
intended to secure bad assets in our banking institutions, in
order to permit banks to open their vaults once again and issue
new loans. Four months down the road, banks are still holding
onto their cash in a miserly way.
Contrary to most Americans and my fiscally conservative roots, I
supported the passage of the TARP bill. I honestly believed that
once the federal government secured the bad debt on the books of
various banks, the banks would start loaning money again for
commercial loans, new car loans and home mortgages.
* All around us, businesses are going under because they cannot
secure the loans they need to buy inventory or to pay staff
during the production cycle.
* The automotive industry is suffering for two reasons, one
because their cars don’t get good enough gas mileage, but more
importantly, because consumers cannot get auto loans.
* Homeowners who need to sell homes cannot sell, because there
is no one around who can get a home loan. Even those individuals
with really good credit are having a hard time finding a bank,
which will loan on a home purchase today, except in certain small
pockets around the country.
* For those individuals who have taken a new job in a far-off
location, owning a home in two cities is a very daunting
situation. But in the current real estate market, the owner of
two homes has to consider letting one home fall to foreclosure,
because it looks like the current financial crisis could continue
for several more years.
The TARP bill passed, money was given to troubled banks, and we
taxpayers got screwed. Along with many others - including the
likes of Donald Trump - I was wrong. We underestimated the
self-serving idiocy of the people who run our banking
Instead of using TARP money to secure the financial well being of
their banks, the banking managers bought competing banks,
remodeled their bathrooms, threw extravagant parties and gave
themselves huge bonuses!
The credit crunch is still deeply entrenched in the United States
and around the world. If TARP was unable to fix the credit
crunch, I can only surmise that we will have a long and
difficult, economic road in front of us all.
But What If You Need To Sell A Home Now?
Home sellers who need to sell a home now, and homebuyers who want
to buy a home now, likely have only one option open to them,
during this financial crisis. Interestingly, the option for home
sellers and homebuyers is exactly the same - FSBO homes, or in
layman-speak, For Sale By Owner homes.
As a home seller, FSBO can seem quite scary, but it shouldn’t be
scary. As a seller, you have options available to help ensure
that your buyer will stick to the path of righteousness.
As a seller, it is important to remember that you have something
that someone else wants. And so long as there is someone out
there that wants to own your home, you have the leverage to
ensure that you will get the terms that you want in the
If you are wise, you will ALWAYS have your attorney review any
paperwork in relationship to the sale of your home.
It must be noted that many mortgages have what is called a “Due
On Sale Clause” in the paperwork. In essence, what this means is
that your bank or mortgage holder has the “option” to call the
mortgage “due in full”, when you sign interest in your property
to a third-party. It should also be noted that if you sign a
Lease With The Option To Buy with a third-party, and you do not
tell your bank, then this amounts to fraud and is a federal
With the legal issues on the table and known upfront, we can go
to the next step. The “Due On Sale Clause” in your mortgage
paperwork is only an “option” that a bank holds in a property,
to ensure that they get paid what is owed to them. Basically,
that clause is in the mortgage paperwork to ensure that if
payment to them stops, then they still have the right to evict
the lessee and take over the property.
BUT - and this is very important to realize - just because your
mortgage has a “Due On Sale Clause” in it, does not mean that
your mortgage holder will not authorize you to do a Lease To Own
or FSBO agreement on your home. The Due On Sale Clause is an
option that banks have, but banks do not always automatically
take advantage of that option.
You have to put yourself in your banker’s shoes to understand
why they would not force the “Due On Sale Clause” on your
If you still owe, let’s say $60,000 on your $100,000 home, the
bank stands to lose as much as $30 or $40,000 if they have to
foreclose your home. When banks foreclose homes, they have to
sell the homes as soon as possible at auction. But, homes
typically sell at auction for as little as 20 to 40 cents on the
dollar. So if you still owe more than 40 cents on the dollar
against your original mortgage, chances are that the bank will
lose a ton of money, if you force them to foreclose your home.
Banks as a rule - and more so in the current economic crisis -
are typically more interested in having the house “paid off in
full” than forcing a homeowner into taking more drastic actions,
like deciding to let the bank to foreclose on the property. More
often than not, the bank will permit the FSBO arrangement, on the
condition that they continue to receive all monthly payments on
As a result, many banks will permit you to bypass the Due On Sale
Clause, if you are willing to speak to them directly about the
possibility. But, you have to open your mouth and talk to your
banker, and then you need to get all of the legal agreements
necessary to protect your interest and the bank’s interest in
Talk first to your banker, then talk to your attorney and have
the paperwork drawn up on a Lease with Option To Buy or other For
Sale By Owner arrangement. With the appropriate permissions
gained and the appropriate legally-binding paperwork in hand, you
are now set to sell your home FSBO.
In most cases, your buyer will lease your home on yearly
renewals, and then the moment they can secure a bank loan of
their own, they will buy out the lease, permitting you to escape
the mortgage on that home and permitting them to transfer the
property into their own name.
Are You Seeking To Buy A Home?
People, who are serious about selling their home now and not
holding that home until the financial crisis has ended, have
started to get creative about how to sell their homes.
If you see a home listed as For Sale By Owner, chances are that
the home seller has already taken the above-described steps to
ensure that they will be able to sell their home now.
So, if you have a down payment available and you want to buy a
home now, it may be in your best interests to seek out FSBO homes
in the area where you wish to buy.
A friend of mine recently bought a quarter million dollar home
under a Lease with Option To Buy agreement. Before the financial
crisis, he had been waiting to find the perfect home, and in the
current economic market, he was able to find the exact home he
wanted to buy for the exact money he desired to spend on the
purchase of his dream home.
The best thing about the Lease with Option To Buy is that you are
only locked into the home for generally one or two years at a
time, and if you decide that you would like to secure a home
mortgage after the banks have started loaning money again, then
you have the option to pay the homeowner the amount of money owed
to take full ownership of the home.
We Cannot Afford To Wait Until The Banks Fix Their Mess
With the TARP bill, it was assumed that the banks would take the
money from the federal government and fix the broken credit
system. Unfortunately, the bankers screwed us and only fixed
their personal bank accounts.
So, until the credit system magically fixes itself, we the
consumers need to take matters into our own hands and get our own
financial houses in order - no pun intended. If we are selling a
home, we need to take action to get that home sold. And if we are
trying to buy a house, seek out those people who are most
motivated to sell you their home - look for that FSBO sign in
front of the house or that FSBO ad in the newspaper.
Let us fix our economic system one FSBO at a time, and maybe we
will be able to shorten the financial crisis that our politicians
seem unable to fix for us.
Cory Shrader writes for the Liberty Home Sellers website. If
you are ready to buy a home now, and the bank has tightened its
credit policies, putting home ownership out of reach for you now,
we might be able to help you. We buy and sell homes in north
central Oklahoma. We offer owner financing on many of the homes
we sell. Be sure to fill out the form on our website, so we can
help you find your next family home. Learn more about available
FSBO Oklahoma homes at: http://www.LibertyHomeSellers.com
Banks Do Not Want To Foreclose Your Home
Copyright (c) 2009 Arlo Mooney
The Financial Side of Economics Blog
When the phone is ringing every day and the bank is threatening
to foreclose your home, because you are behind on payments, it is
easy to believe that the banker is drooling over the possibility
of foreclosing on your home. But you should know that the bank
stands to lose a lot of money if they are forced to foreclose on
your home. Read this article to learn the real truth about banks
With what I have learned about banks and foreclosure over the
last couple years, the information that I am about to share with
you now, could have helped a few of my friends avoid losing their
homes. Because I could not help them in their time of need, it is
my hope that I could help you now, in your time of need.
I know that my initial suggestion that “banks do not want to
foreclose on your home” may seem far-fetched to you now, but by
the time you have read this article in full, you will recognize
that you have more power over the bank than the bank would care
to admit to you.
The Truth Is In The Numbers
Let us suppose for the sake of this story that you paid $100,000
for your home. And let us suppose that you put a full 20% down on
that home five years ago. In this scenario, your bank loaned you
$80,000 to help you purchase your home, and at best, you have
probably paid $10,000 towards the principle of your home loan.
In the past year, you suddenly found your finances stretched for
one reason or another. Perhaps you changed jobs, or your business
contracted with the economy. Perhaps you had a financial
emergency that required a lot of cash to solve, and now you find
yourself struggling to catch up on the rest of your bills.
In the end, it really does not matter the reason for your current
financial crisis. It will have little bearing on the outcome of
This is where most people make a mistake in their understanding
of the banks’ motives in threatening foreclosure. The bank is
not threatening foreclosure because they want your house. The
bank is threatening foreclosure, because they want to spur you to
action, to fix your current financial crisis.
I know you are thinking that the bank will sell your home for its
full retail value, but they won’t, because they cannot afford to
hold onto your house for a long period of time. In order to sell
a home for full retail price, the bank would need to commit to
holding the home, perhaps for years, until that perfect buyer
arrives to buy it.
If you force your bank to foreclose your home, your bank will put
your house up for auction at a sheriff’s sale. PAY ATTENTION…
this is important. When your bank puts your house up for auction,
they will generally only get 35 to 40 cents on the dollar for
The bank is currently out 70 cents on the dollar against the
retail value of your home, but if forced to auction, the best the
bank can expect to get out of your home is half what the bank has
invested into your home!
In the scenario I have outlined here, you owe $70,000 on a
$100,000 home. But if you force the bank to foreclose your home,
the best the bank can hope to achieve is to get $35 to $40,000
for your home at auction. Do the math. If your bank forecloses
your home, your bank will lose between $30 and $35,000, when they
sell your home. Ouch!
This is the key information that you will use to stop the
foreclosure of your home. As you can now recognize, your bank
needs you to stay in your home, more than they desire to
foreclose on your home.
As should now be obvious, you as the homeowner have a lot of
leverage over your bank. And if you play your cards just right,
you will not have to lose your home.
If you find yourself behind on payments and you are looking for a
way to save your home from foreclosure, you need to speak to a
company like National Foreclosure Counseling Services
(http://nfcscorp.com/). NFCS is a company, which can help you
negotiate a repayment plan or loan modification on your behalf.
When NFCS contacts your bank on your behalf, your bank knows that
you are interested in taking whatever steps are necessary to get
back on the straight and narrow with them. When banks realize
that you are serious about staying in your home, they have to
weigh the options of negotiating a loan modification or losing an
average of $30,000 when they foreclose your home.
If the bank has someone in a home that wants to stay in the home,
then the bank stands a chance of retaining some of their profits
on their original loan, if they are willing to renegotiate the
terms of that loan. However, if the bank is forced to foreclose
on the property, then chances are good that the bank will lose a
lot of money.
Think about it. Your bank does not want to foreclose your home.
It is in the best interests of your bank to keep you in your
National Foreclosure Counseling Services (http://nfcscorp.com/)
has a proven track record (with documentation) of helping
families such as yours renegotiate with their banks to help them
to stay in their homes. In just the last 90 days, NFCS has helped
600 families renegotiate with their banks to avoid foreclosure.
The Most Important Step In This Process
You have the power to save your home from foreclosure, if you
simply decide that you want to exercise your power of
Who knows? You may have decided that you don’t want to try to
hang on to your home for whatever reason. So long as you
understand that a foreclosure will hurt your credit for at least
ten years, perhaps preventing you from being able to buy another
home, then by all means, it is your choice to accept foreclosure
The current real estate crisis will not last forever, and housing
prices will rebound eventually. Even if you see yourself
upside-down in your home now, you may just find that if you hang
on to your home another five or ten years, then housing prices
will bounce back and you will survive the current real estate
crisis without great financial loss.
But if you are like most people, you probably cannot bear the
thought of losing your home and the equity you have so far built
up in your home. If you desire to hang on to your home, then you
alone must take that first step towards saving your home from
foreclosure. You must either visit the NFCS website at
(http://nfcscorp.com/), or you should call NFCS at:
Author’s Note: This article was originally posted at:
Arlo Mooney has dedicated himself to helping people properly
manage their personal finances, by helping them to understand
the gravity of their personal financial decisions. With his
background in economics, he strives to help people understand
complex economic principles. Read more
of his work at
The Financial Side of Economics blog at: