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Writer's picturePace Morby

How real estate agents can get ahead by using creative financing

Some real estate agents are stuck.


They understand why people can’t buy houses when interest rates are so high, and they know that there’s an ongoing housing shortage. So, they take the deals they can get when they can get them and just pray there are more deals headed their way.


Instead of hoping the fates align for you, you could align yourself with a new way of thinking that brings you more transactions and helps more clients.


To change your way of thinking and to bring you more clients, you need to understand the challenges your potential clients are facing.


One big challenge is financing.



The Traditional Way of Buying a Home

Traditional financing methods can often be restrictive and limit opportunities for both agents and their clients. For example, up to 15% of Americans are self-employed in the US. If you’re a successful self-employed person, and you’ve provided for your family for over a year and now you want a home, tough luck.


Traditional lending sources won’t let you qualify for a loan unless you can show 2 full years of self-employment income in the same industry. So, you’d be one of the many people up a creek without a paddle.


However, when you embrace that there are other ways of helping people finance their homes, like by using creative financing strategies, real estate agents can get ahead in the industry, close more deals, help clients acquire more properties in the future, and build a loyal client base.


Creative financing just means any non-traditional methods of funding real estate transactions. These methods provide flexibility and open up opportunities that may not have been possible with conventional loans or mortgages.


These strategies are perfect for times like what we’re seeing in 2023. Housing prices are up, and so are interest rates. If you’re expecting the same number of people to not only want to buy a home but to qualify for a home that they want to be in as there were in 2020, you’re not going to have a good time.


By utilizing creative financing techniques, real estate agents can help their clients secure funding for property purchases that otherwise would have been out of reach.


Close more deals as a real estate agent

One way real estate agents can close more deals with creative financing is by offering lease options to potential buyers.


A lease option allows a buyer to rent a property with an option to purchase it at a later date. This type of arrangement appeals to buyers who may not qualify for traditional mortgages but still want the opportunity to own a home in the future.


By presenting lease options as an alternative solution to potential buyers who are struggling with traditional financing options, real estate agents broaden their pool of potential clients. This increases their chances of closing deals and earning commissions on transactions that may have otherwise fallen through.


Owner Carryback Mortgages

Another creative financing strategy that I actually see real estate agents using real estate agents usually use is seller financing or owner carryback mortgages.


These are great options for getting people into and out of homes quickly, with the proper legal documentation, and making sure everyone involved either makes money or saves money.


But, seller financing is usually a backup, when it should be used as a first option so sellers and buyers can both have a win.


In this scenario, instead of relying on a bank or lender for funds, the seller acts as the lender and provides direct financing to the buyer.


For sellers looking to sell their property quickly or attract buyers in a competitive market, offering owner carryback mortgages provides an attractive incentive.


For buyers who may not meet strict lending criteria or require additional time before securing traditional mortgage approval (such as self-employed individuals or those with less-than-perfect credit), seller financing offers an opportunity to purchase a property without the need for traditional bank financing.


By incorporating seller financing into their arsenal of creative financing strategies, real estate agents can tap into a larger pool of potential buyers and close more deals. This not only benefits their bottom line but also helps clients achieve their homeownership dreams when traditional methods may have failed them.



Real Estate Investors Are Your Best Friend

In addition to closing more deals, real estate agents who embrace creative financing strategies can help their clients acquire more properties in the future whether it be for second homes, rental properties, or fix and flips.


When you give real estate investors more innovative solutions such as subject-to transactions or wraparound mortgages, agents enable clients to expand their real estate portfolios without relying solely on conventional funding sources.


This also opens a door to networking and increasing your pool of returning clients, because investors are looking for properties all the time and you’re offering them all the time.


Why not connect the dots and make connections with them if it’ll put more money in both of your pockets?


Misconceptions About Creative Financing

Creative Financing is the Back-Up Plan

Now, a big thing I hear is that creative only works for people who find themselves in bad situations, like less-than perfect credit or being self-employed, but that’s just not true.


I believe that real estate agents have found a great niche for themselves that helps people AND puts food on the table. So, why would you pigeonhole yourself and your clients into one way to buy homes only?


Creative financing usually puts more money into the pockets of sellers, saves money for buyers AND makes sure that all agents get paid in the process.

Creative Financing is Illegal

My go-to choice for creative financing is seller financing and subject-to.


We’ve already talked a little bit about seller financing, so let’s dig into subject-to transactions.


Subject-to transactions involve taking over the existing mortgage on a property while allowing the original homeowner to remain liable for the loan. This strategy allows people to acquire properties without having to qualify for new loans or put down significant amounts of cash.


Doesn’t this sound like assuming a mortgage?



The difference between assuming a mortgage and subject-to transactions is that in the case of subject-to, the seller is not released from their responsibility of the original loan and their name stays on the mortgage; HOWEVER, the buyer of the property takes over the payments of the loan and the title now transfers to the buyer.





Where to start in creative financing as a real estate agent

By guiding clients through creative financing transactions, real estate agents position themselves as valuable resources in helping individuals grow their wealth through strategic property acquisitions.


As clients see success and increase their portfolios with these non-traditional methods, they are likely to turn to the agent who helped them navigate these strategies when looking for future investment opportunities.


Also, by becoming part of a creative financing community or network specifically designed for real estate professionals, agents can gain access to even more opportunities and expand their clientele base.


Being part of such a community provides agents with networking opportunities where they can connect with potential buyers looking for alternative financing solutions. Additionally, they can collaborate with fellow professionals who have experience in structuring creative financing deals and learn from their success.


A creative financing community can also serve as a platform for sharing resources, staying updated on industry trends, and accessing educational materials related to non-traditional funding strategies.


By continuously expanding their knowledge and staying ahead of the curve in this ever-evolving field, you can position yourself as a trusted advisor who can offer innovative solutions to their clients' financial challenges.


So, to give you more details (and even examples) of how creative financing can help you help more clients, I’ve put together an eBook for you.


This shows you specific examples of where you fit into the world of creative financing, how to get paid, and where to use creative financing when helping clients.




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