Lot Plus Cash Equals House – Real Estate

There is a magic little formula that works wonders when contemplating a trade. I used the example in the title of trading land and cash for a home. But really, any type of property lower in desirability is moved up the food chain by adding cash to the trade. Cash is something we are accustomed to trading for, but it is simply a method of keeping score; you can not live in it, but you can buy a place to live in with it. Sellers are trained to think in terms of cash because they can use it to get where they want to go.

Because cash is so acceptable to people we can use it to attract the interest of sellers that may not have considered trading for our vacant lot. The better we understand the concept of priorities or acceptability the more successful we will be in trading properties. Let’s consider we had $50,000 to invest and we had only two choices. A rental property worth $500,000 but would have a negative cash flow of $3,000 per month or a $50,000 vacant lot located in the path of growth. Some of us would go with the rental property, others would take the lot.

Understanding this basic principle will help facilitate a trade. Both parties in a trade do not want the property they have. Worded a little differently, they want what the other party has more than they want what they have. I hope that makes sense.

Sellers are trying to get rid of the real estate they own so they can do something. They may need a larger or smaller home, relocating to another city or getting a divorce. People sell properties for all kinds of reasons. By understanding the desires of the other party we can make an offer that make sense for both sides.

Real estate trades are more common than you may realize. They would be much more common if sellers gave it a little thought. If you have a smaller home and want a larger home, why not look for someone that is downsizing? But the other side must want our property, right? Not necessarily, remember they must want what we have more than they want their existing property. I showed several homes this weekend above the medium price range for my area, well okay, double the average. The point is more than one of these estates had been on the market for over a year. Do you think any of the sellers would not entertain taking an unencumbered vacant lot in trade?

So here is how the formula lot plus cash equals house works. Let’s assume we own a lot worth $50,000 and we want to trade it for a home in the $400,000 price range. We would advertise: HAVE: $350,000 cash and vacant lot worth $50,000. WANT: Singe family home.

Have you ever seen an ad like that in the real estate section of the Sunday paper? Probably not, that is why it will raise more than a few eyebrows.

But we do not have $350,000 in cash you protest. What would happen if we made a $50,000 cash down payment and bought a home? We would put a $350,000 loan against the home we are buying. Same thing is true in a trade; all we do is make it a part of our offer.

Why would a seller do this? It goes back to their circumstances of ownership. What if the seller has already bought another home and is making two house payments? The vacant home they are trying to sell has a $2,500 per month house payment, utility bills and landscaping expense. It could very easily be costing $3,000 every month the home is on the market. Along we come and offer to give them cash and a free and clear lot without mortgage payments. Poof, we traded for a house. I told you it would like magic.

Will it work in reverse? Absolutely. Have: Single family home in desirable neighborhood, will trade for land. This time we do not mention cash until someone steps forward with land.

Selling a home is a lot easier if you are flexible about how you get from point A to point B. If you take off the blinders and really look at what you have, the solution may present itself.

Article Source: http://www.real-estate-article-directory.com

Debbie Rood is a Realtor in Louisville, Kentucky. She is a residential real estate specialist. She publishes many articles on real estate and mortgage financing on her web site www.debbierood.com/

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