11/12/2008
BY MECHELE COOPER
Staff Writer
As borrowing from banks becomes more difficult, seller financing is becoming more common.
While considered riskier than bank financing, seller financing can sometimes be combined with bank financing so owners can obtain the price they're looking for and move along a transaction.
Businessman David Andrews said he has always owner-financed the used mobile homes he sells at Pine Ridge Village in Windsor.
Bank financing for older mobile homes has always been difficult, he said.
But with the mortgage crisis and looming recession, Andrews said, contractors have been coming to him for loans to help them finish projects.
He said banks are not providing as many construction loans as they did before the mortgage crisis.
"Banks are definitely not loaning as easily on new construction as they were," Andrews said. "I know that because I have backed builders several times. Even on presold homes, they've not been able to get financing. Owners can't find financing until the construction is completed."
Andrews said he has been lending only to builders with viable, strong projects that are under contract with a hefty deposit and bank financing once the house is completed.
Mark Walker, of the Maine Bankers Association, said seller financing can be good incentive for a buyer.
Contractors may have built a home or were in the process of building a home when the economy bottomed out. Seller financing is a way to move that property, he said.
"So very definitely there's more seller financing than normal," he said.
Bob Sherwood, of Windsor, is willing to finance land he wants to sell at 12 percent interest with a small down payment.
"I've gotten quite a few calls on it," Sherwood said. "The banks aren't financing house lots. Young families ... the banks aren't taking them."
Kevin Judkins, of Coldwell Banker Rizzo Mattson Realtors, said there's not as many bank options out there for home sellers as there were during the mortgage crisis back in late 1989 and early 1990.
"The last time that we kind of went through this same type of housing swing, there were a lot of folks who still had mortgages that were assumable," Judkins said. "You were allowed to work with that to do some type of creative financing."
Another option, he said, was a "wrap-around mortgage," a form of seller financing.
If the seller still owes money on the home a buyer wants, a wrap-around mortgage is a way to finance the purchase without going through a lender. In a wrap-around mortgage, the buyer pays the seller the monthly payment on the existing mortgage, plus an additional payment to cover the balance of the purchase price for the home.
Ashley Richards, president of the Home Builders & Remodelers Association of Maine, said members of his organization haven't had as much trouble getting loans.
But, he said, they have stopped building as many houses hoping to find a buyer, often called a "spec home."
"There isn't a lot of spec housing going on," Richards said. "The market is too risky with the price of everything going down. I think the builders are building custom homes."
Mechele Cooper -- 623-3811, Ext. 408
mcooper@centralmaine.com
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