Investing in real estate is a three-step process: research, financing and implementation/profit. If we do not possess proper financing, the other steps become irrelevant.
Due to the Polish market’s relatively young age, and to legal and mentality-related conditions, the methods of financing that have used on developed markets (especially the USA) for the last several decades are still not common here.
Usually Poles finance their purchases in one of only two ways: with cash or a bank loan. In the USA, there is a lot more options and some of them are slowly seeping into our market, but they hit upon a barrier created by low finance knowledge and a different mentality.
The market forces the need to search for new, better and faster alternative methods of selling real estate. The time the seller is expected to wait for a sale (especially in the case of expensive properties) is getting longer, which incurs losses that can reach several dozen percent of the property’s value. A way to avoid losses and to achieve a higher price is financing the seller. The motive of the seller is key here.
In the USA, you can buy a property with only $ 10 on you. The motive of the owner is evident in the offer of sale. This saves time and money for the buyer.
In Poland, even though such transactions also take place, the motive of the seller is not apparent in the ad (a shame, really). You can learn about the motive by contacting the owner and for that you need people skills.
There are two types of transactions using this type of financing: non-cash or with a partial payment. Using other peoples’ resources is essential for these types of transactions, as it allows for a purchase of a larger number of properties without the need to earn a credit rating or accumulate a substantial supply of cash over the years.
The seller financing method is becoming more and more appealing, as receiving a bank loan is getting a lot harder, as it requires an assessment of a credit rating.
While most sellers focus on the price of the property, it is only one of the five key conditions of a successful transaction. It is wise to take this into account and negotiate an appropriate method of financing. This way an otherwise unpromising transaction may become possible.