With every passing day the cost of buying a home increases as inflation, government spending and rising interest rates push prices to unheard of heights, pricing all but the affluent out of the market. Fortunately there are several ways to overcome the barriers to home ownership.
One such method requires finding a motivated seller and educating him in an alternative that can benefit both buyer and seller. With prices so high, buyers become scarce which places sellers between a rock and a hard place, resulting in a motivated seller. Ideally, the seller owns the home free and clear or with a small remaining mortgage, which is often the case with empty-nest elders.
The general concept for this method is often used in Hawai'i, where land is scarce and those who own it do not want to part with it, so they sell only the house and lease the land to the buyer, usually under a lifetime or other long-term lease. Think about that for a moment...
The seller benefits because he gets his house sold and the lease on the land supplements his income, which is particularly good for elders on a fixed income. The buyer benefits because he is only buying the house, which is considerably less expensive than the entire property. It also means it would be easier to qualify for the smaller mortgage.
Once you have found the right seller, the first step is to determine what portion of the value is the house, and which portion the land. In the following scan of an actual tax card, you will see the land is valued at $23,600 and the house at $138,500 for a total value of $162,100. Bear in mind, tax valuations are rarely accurate valuations, as tax values are normally determined by a formula that is discounted. That does not matter - what is important are the percentages. In the case of the property shown, the house represents roughly 85% of the overall value. Bear in mind in many cases the value of the land is often equal to or even greater than the value of the house. If that were true in this case, the house value could be as low as $81,000, making for a much smaller mortgage.
Assuming the real value - and the asking price of the property - is $219,000, the house, alone, is valued at $186,150. This represents a savings to the buyer of $32,850 - a big mark down. Assuming a mortgage (currently 7.7%) with $20,000 down, PITI would be $1424.35 as opposed to $1673.83 if buyer purchases the entire property. If the buyer negotiates a long-term lease at $100/month, buyer saves $149.48 each month in addition to saving the $32,850.
Your agreement could include terms that allow you to purchase the land at some point at a predetermined price. It could also include a stipulation that if you ever sell or the home is otherwise transferred, the landowner gets first dibs to buy it at the market value at that time. If he chooses not to, the lease shall be transferable to the new owner of the house.
This is just one of several methods taught, in detail, in "The Simple Man's Guide to Real Estate". Choose the strategy that suits your situation best.
"The Simple Man's Guide to Real Estate" has been training investors and home buyers since 1989, and is an invaluable real estate aid. It even includes free mentoring and software that creates perfect offers every time. And unlike the $35,000 cost of Than Merrill's FortuneBuilders or Armando Montelogo's program, "The Simple Man's Guide to Real Estate" is offered on a not-for-profit basis for under $100. You simply cannot find another instructional training aid for less anywhere on the planet.
If you have come to this blog, you are likely interested in finding a way to homeownership, so you owe it to yourself to at least check it out - doing so is free!
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