Seller financing has a wider appeal than many people might think. It certainly works for the individual homeowner who wants to appeal to the broadest market possible and to sell and close as quickly as possible. It also works for the business owner looking to sell and realize the most from the deal.
The above examples deal with how seller financing works for individuals. For many of the same reasons, corporations and large developers are realizing the benefits of seller financing as well. In Las Vegas, for example, developers involved with the $8.5 billion CityCenter project are using seller financing to their advantage. City Center is intended to have 2,400 high-rise condominiums priced from $500,000 to $9 million. 1,100 are still unsold as the project nears completion. The developers have lowered prices by 30% with some promising results. Deposits are starting to be made on units nearing completion.
Now, in this post in The Casino City Times, Howard Stutz says, “the challenge will be closing sales. Realtors said banks are not so quick to provide funding for high-rise purchases….”
Stutz spoke to Tony Dennis, executive vice president of CityCenter’s Residential Division for MGM Mirage, who said that “CityCenter is looking at potential seller financing possibilities, similar to a program the Palms began using to close sales on units inside its high-rise condominium tower. “ He broadened that by saying
“we’re looking at everything that can be supportive to our buyers.”
This is clearly a case of what happens in Vegas need not stay in Vegas (it’s not like they originated the idea of seller financing). Developers of all sizes are sitting on unsold units all over the country. Seller financing is one way to make sales happen. Granted, with seller financing the developer does not get the entire sales price all at once as would happen with conventional financing. What he does get is the down payments and a substantial income stream that can be used to pay off current obligations such as construction loans. If the developer wants to cash out before the balloons are due on the financed properties, the notes can be sold, preferably after a bit of seasoning, to investors who seek these types of financial instruments.
By offering seller financing the developer accomplishes the goal of selling the developed properties, likely at a profitable price. Getting whipsawed by construction loans and other obligations is avoided. The bank doesn’t get dragged down by non-performing construction loans. Renters become homeowners. What’s not to like?
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