Down payment assistance: preserving the market value of the homeAlisa Allredhome prices, housing market, sales, buyer assistance
CNN recently released a report from National City Corporation
listing cities in the United States selling homes significantly
over and under market value (visit www.money.cnn.com for the full
list). Homes sold under market value weaken the housing market and
negatively impact sellers, buyers and communities. Down payment
assistance programs directly address this problem by providing a
way for sellers to sell their homes at full market value, even in a
buyer's market.
The number one obstacle potential homebuyers face is the down
payment. "Someday," is the mantra of renters when asked about
homeownership; someday, they will have saved enough for a down
payment. When sellers extend a seller-participation down payment
assistance grant in the sale of their home, the pool of potential
buyers suddenly increases as much as 30 percent. The property
becomes available to a much wider range of buyers without
undermining the property value.
Misti Bishop, owner/broker of Custom Real Estate Services in
Fort Worth, Texas, presents sellers with the option of a down
payment assistance grant right up front at the selling
presentation. "My clients know all of their options right from the
start," she says. Since incorporating down payment assistance in
her business, Misti has sold 98.9 percent of her properties at the
asking priceand business has been booming. "Not everyone knows
about this [down payment assistance]," Misti continues. "It has
given me the edge in the real estate market."
When sellers agree to participate in a down payment assistance
program, they agree to sell their house for up to the full market
value while offering to cover out-of-pocket expenses for the buyer
through a grant from a down payment assistance program (DAP). The
seller also agrees to replenish these funds by making a donation to
the DAP in the amount of the grant plus a seller's contribution
fee, usually ranging anywhere from $395-$795. This donation allows
the DAP to continue providing housing grants to future
homebuyers.
Patrick McCarroll, a loan officer at CTX Mortgage, advocates the
advantages of down payment assistance to both real estate agents
and home loan officers. Patrick tells real estate professionals,
"Utilizing down payment grants can increase your business by 20-30
percent a year." He also points out that, typically, after 30 days
on the market, the price of a home drops by an average of five
percent. Real estate agents whose clients extend down payment
assistance sell their home faster without dropping the asking
price.
Homebuyers benefiting from down payment assistance enter a home
in better financial condition. Down payment assistance allows them
to start building equity immediately. For stronger buyers and
successful sales, down payment assistance makes the home sale
transaction a win-win situation for everyone.
Alisa Allred is director of community building at Esther
Foundation. She may be reached at (877) 493-2539 or e-mail
[email protected].
