Seller Financing - Now's the Time

Finding it hard to sell your real estate at a "reasonable price" (whatever that means)? Consider carrying back so-called Seller Financing. The benefits can be stellar. You will defer the payment of the majority of your capital gains tax. The cash downpayment that you receive is comprised of return of a portion of your cost basis and the rest will be capital gain. The same goes for the principle portion of the mortgage payments that you receive from your purchaser. (This is simplistic, but you get the idea...consult your tax expert.) The interest portion of those payments will be treated as ordinary passive income, but you have some control there as well by charging the lowest possible interest rate that you can (don't go below the IRS's imputed rate though) in exchange for a higher selling price (which will be taxed at capital gain tax rates ONLY WHEN YOU RECEIVE IT)! This type of sale also gives you the benefit of having a safe place to invest the sale proceeds at a rate of return that is set by you. There are several ways to make sure that your loan doesn't go bad and wind up becoming a liability. A few of those ways include making the buyer maintain a real estate tax escrow with you, providing you with certificates of insurance and actually inspecting your collateral once or twice a year to make sure that it is being maintained (and making it an event of buyer default if it is not). If your property is free and clear, then seller financing is a no-brainer. If your balance is a small one, then just require a downpayment from your buyer that covers your loan balance payoff and other costs of sale. If your loan balance is not small and the loan has due on sale provisions (alienation acceleration) then go in a talk to the lender about your plans. You may be surprised at their relief in hearing that they are not about to get back yet another property!

Bloomberg Journalist Appreciates My Compliment

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From:	David Kaufman
To:	DAVID M LEVITT, BLOOMBERG/ NEWSROOM:
Subject:	Commercial Property Deal Drought Worst in 18 Years
Date:	09/15/2009 1:3:31

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David,

My compliments on a great article based in realism.

I did the first, last and most auctions for the RTC during their existence. You nailed it when you said… “…the lender in most instances doesn’t have the ability to take the charge to earnings and sell the property.”

David Kaufman, CCIM

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From: DAVID M LEVITT, BLOOMBERG/ NEWSROOM: [mailto:dlevitt@bloomberg.net]

Sent: Tuesday, September 15, 2009 8:50 AM
To: kaufman100@gmail.com
Subject: Re:Commercial Property Deal Drought Worst in 18 Years

Thanks. I'm glad it rang true to you, especially since I wasn't around for the last time. I was trying to see if we've ever quoted you before, but there are too many David Kaufmans in our system. You're not David W. Kaufman of Millersburg Ohio, right? We don't have you under your current or recent associations.

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From: David M. Kaufman

To: David M. Levitt

Sent: Wednesday, September 16, 2009 12:39 Zulu

David,

I was around then and your article rang very true. That’s why I wrote to you. You captured the essence. You nailed it.

If you click on my LinkedIn profile ( www.linkedin.com/in/davidmkaufman ) it will give you my complete background and also, you will find a link to my blog (and website) which has an expansive answer to a similar issue. I’ll paste it below for your convenience.

At one time, I was the national spokesperson for the CCIM designation ( www.ccim.com ). I have been interviewed all over the country by all major news sources at one time or another over the past 20 years. I’ll attached some samples.

I would very much like to give you my commentary when and if you are looking for some.

There are all kinds of misconceptions that I hear and would like to correct. It frustrates me when I hear some news people dragging out all the old saws that really do not apply but are ingrained in peoples’ minds. For example…location, location, location are not the most important things in real estate, it is actually location and timing.

Or how about… “It’s a buyers’ market”. There is no such thing as a buyers’ or sellers’ market. There is just the market and if you set your price to the market guess what, your shopping center, or what have you, sells! Even in these difficult times, any seller can create a so-called sellers’ market by dropping their asking price 50%. The buyers will line up and come out of the woodwork. But, the problem is that the first buyer in line will buy at that 50% price. The price never gets a chance to increase.

That’s why I do auctions of real estate. In the buyers’ minds at auction the price has been cut to zero and the lineup of buyers are ushered into a room where I can get them to compete against each other for my sellers’ property and they race right past that 50% discounted price to the revealed market value. I like to say, “Demand never sleeps.” And you can quote me on that!

One last thought, I looked for you on LinkedIn and did not find you. Unless I just missed you, it is imperative you not only get on it, but use it as the phenomenal source that it is (a network of 43,000,000 business and professional people worldwide). Buy LinkedIn for Dummies, it will blow your mind. Take a hard look at my profile and you will see about what I am talking.

David M. Kaufman, CCIM