Problem
Seller of a house priced at $550,000 cannot sell house in this market because financing is virtually unavailable at this price point.

Scenario
Seller’s listing has expired and the home has not sold. Seller was expecting to list house for $550,000 and net 88% ($484,000) of asking price after all broker fees, closing costs, and holding costs. Seller has equity in house and is current on payments; however, seller’s income has dropped substantially and financial pressure is looming.

Conventional Solution (That didn’t work)
List with a Realtor. Realtor puts house on MLS, puts up a sign, and waits for the phone to ring.

Kalomar Solution
Obtain a option for 60 days to purchase the house for $456,000 (80% of new asking price).
Kalomar will then relists the property with a competent realtor who will do more than just put the property on the MLS. Commission will be 10% instead of 6% to make the property stand out.
Property will be marketed with seller financing (5-10% down and terms set at 2-3% above market rates). This removes the “no bank financing obstacle”. Property will be sold subject to existing first. Seller financing applies to the equity in the property.
With buyer in place, we then offer to sell the note created by the seller to a note buyer. Proceeds of note go to seller to satisfy seller’s need for cash.

The Numbers
Seller’s original expected price: $535,000
Realtors Fees and Closing Costs: -$66,000
Existing first Trust Deed loan balance: -$250,000
Seller’s original hoped for equity: $219,000

New Sales price (with seller financing and 10% commission for realtors): $570,000
Realtor’s Commission: -$57,000
Kalomar’s margin: -$57,000
Existing 1st Trust Deed loan balance: -$250,000
Net Equity to Seller: $206,000

$149,000 Note created by seller and sold at 10% discount: $134,000
Buyer’s down payment: $57,000
Actual Cash to Seller (87% of original goal): $191,000
Difference from original goal: <$28,000>

Note to Reader: We are in a declining market with property prices having decreased at an average of 1.58% per month in San Diego County over the 12 months ending March 2009. By not offering seller financing and waiting for a conventional buyer, it is quite conceivable that the price of the property could decline another 10-20% over the next 12 months; thereby exacerbating the seller’s already deteriorating financial position.