Archive for November, 2011

Frequency of Seller Financing in New Mexico

November 1st, 2011

In 2010 there were 1,827 real estate contracts recorded at the county clerk’s offices in the counties of Bernalillo, Sandoval, and Valencia (Albuquerque Area).  These are properties that have been closed using an installment sale (seller financing).  I do not have research on the rest of the state, but because of the following facts I would assume that there are at least the same number of RECs, or more, recorded in the rest of the State because of the following:

  • The fact that half the population in the state of New Mexico lives outside the Albuquerque area.
  • Most of those areas are rural areas where conventional financing is difficult to obtain.
  • Thirdly, there are 14 escrow companies in NM.  Five are in the Albuquerque area and the nine others are spread out across the state.
  • Fourthly, half the Realtors in NM operate outside of the Albuquerque area.

I think you can safely say there are between 3,600 and 4,000 real estate transactions closed every year in the State of New Mexico using real estate contracts.  It looks like this year is tracking about the same as last year.  By the way, Security Escrow has a 42% market share in the Albuquerque area.  Our closest competitor has a 21% share.  In addition, 38% of the total contracts we receive every year are sent to us by property owners, Realtors and title companies from outside the Albuquerque area.

35% of New Mexicans own their homes free and clear.  This makes them prime candidates to use seller financing.  It’s up to you to let them know about seller financing (also known as owner financing, seller carry-back and contract for deed).  I have written previous articles for this blog that will help you and your client better understand seller financing.

Unless the seller needs all their equity out of the property, seller financing offers them a great investment opportunity. Where else would they put cash at this point in time?  Bank CDs pay less than 1%.  The stock market is extremely volatile and who knows about gold.  If they use seller financing they can get 5, 6 or 7% interest on their equity, which is secured by the property they just sold.  Selling your property on an installment sale can easily beat returns that you might receive if you turn the property into a rental.  In addition, it’s the buyer who pays for taxes, insurance and maintains the property.

The seller does not have to own the property free and clear to use an installment sale.  They would simply sell it on a real estate contract and use part or all of the payment they receive to pay their mortgage monthly as long as the mortgage will pay off before or at the same time the contract pays off.  You use an escrow company to facilitate this.

Please check the class schedule on this blog to see when my next four hour continuing education course for Realtors is scheduled.  Some of these classes have sold out in the past.