We've all heard the phrase "creative financing" used in describing some of the horrors visited upon innocent borrowers, who blindly (Ohio is a Buyer Beware state, as are most) listened to fact-twisting lenders (there are actually only a few but they give everyone in this industry a bad name) who got them neck deep in financial crap.
Interest only loans. "NINJA" loans. Everything you can imagine was visited upon a handful of naive buyers who didn't do their homework, or didn't read the paperwork, or didn't take a calculator with them to see what might happen if they signed the papers.
And yet, many well-off investors have done well using legal creative financing to make transactions happen. Unfortunately, there is legislation in Congress that would limit some of this creativity all in the name of protecting consumers. The fact is, the people who wrote the bill don't understand commerce, or they don't like it.
Some provisions of the legislation actually will harm the commercial/investment real estate market even through it is aimed at protecting consumers. Confused yet? Frankly, I'm confused that the powers that be in Washington who purport to be smarter than everyone else are visiting this contrived piece of proposed law upon the public and thinking the usual that those in power think . . . "how can anyone possibly be opposed to this?"
In this market, creative financing is more important than ever. Exchanges are becoming more the norm than the exception. Offering in other land, properties or even chattel -- boats, cars, etc. -- is what is making deals happen. Lenders have so tightened the screws on borrowers that it has ground commercial real estate to a virtual halt. Not because the borrowers aren't good risks. It's because lenders are suddenly terrified of risk. Something that their entire industry is built on.
So it is up to creative real estate agents, and lenders who truly understand commerce (if a lender is even involved) to make a proposed transaction a reality. Second mortgages held by the seller are occurring with far more frequency. Land contracts are occurring with far more frequency.
Sellers who expect an all cash deal might still get it. But it will take longer. Or they might not get their price.
The watchwords in this environment are: Patience . . . and Creativity.