Friday, February 20, 2004

100% financing makes a comeback in real estate offers

As listing agents, we see the terms and conditions that buyers are offering when they make an offer to buy a piece of property. One trend we have noticed is that many buyers are electing to do 100% financing. Usually the first trust deed is in the amount of 80% of the value, and there is a second trust deed for 20% of the value. As for the terms of the second, the interest rate and terms would not be as favorable as for the first.

Why is this happening? Our thoughts are that perhaps due to the low interest rates the buyers are leveraging themselves to the maximum amount possible. In addition, buyers are wanting to keep cash in their pocket for property repairs. Whatever the reason, make sure you fully understand the consequences of 100% financing, and its terms. This can be an "iffy" situation in the event of a downturn in the real estate market.

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