Mortgaged Property Owner Solution to the Covid-19 Crisis

by fred glick
Photo by Gustavo Zambelli on Unsplash

It's March 29, 2020 and there's a pandemic going on as you all know.  

For the real estate shopper pre-corona, there were digital fistfights for property all up and down the coast of California and the Seattle area.

I lost deals with buyers paying over $250,000 easily over list prices and waiving everything.  The thirst for real estate was insatiable.  

And then now.  

We are currently on a statewide stay in place order for only essential services. I, happily, am stationed at home making sure i get everything delivered and get some exercise.  

The Governor of Washington even came out with specific instructions on real estate showings.   Self-showings are cool but he is now allowing two people to meet at a property as long as they stay far enough apart.

But I ask the questions, WTF is so important about real estate that you have to see it in the middle of pandemic.  Or, let me put it another way, are you too shortsighted to see that after this is over, our entire world economy will go through the biggest reboot since 2008 and the number of people working that own homes and/or want to buy a home will decrease significantly?

In other words, prices have to come down.  

Priorities come this new era will be to restart business and lives, not relax and lay roots.

HOW TO HELP SELLERS

People will have to sell out of this because they have lost their job.  They become renters because they can't qualify.  But, what if we had a program where someone could make your mortgage payment for you and receive that much of a percentage interest in the equity of your property and/or get paid back when you sell?

If people are going to be out of work for a year and have a $1000 payment, isn't it smarter to give people $12,000, have them fairly repay it and avoid court costs, legal fees,  moving fees, unsighted economic struggles to go along with the emotional embarrassment and sorrow.

Years ago, the FHA had a program that allowed for what is called crowd sharing today.  A SAM, Shared Appreciation Mortgage which allowed an owner occupant of a property to get anyone to put up the required cash for the down payment and/or closing cost up to 100% of the funds needed.  In return, they would share in the increase in the value of the property.  

These were popular in the 80's but lost their luster and the program was discontinued because of a bad market.

It's time to bring it back.  The first step is to make FHA, Fannie Mae and Freddie Mac allow it.  Even for existing loans.  It's a win-win.