The Byers

John and Jill Byers have lived in their small rental home in a hip section of Denver for the past 3 years since they got married. John works for an auto parts store while Jill is the secretary for a food distributor. Both have been employed for six years and both have IRA plans at work.

Because of their stable work histories, the Byers received quite a few credit card offers over the years. Back in 2006, they got an offer that they were pre-approved for a $25,000 Visa card. They decided to take advantage of it. Now they have a $3,500 balance on the card. They have always paid all of their bills on time, but haven't got any significant savings. Last month, the Byers got a letter from Visa saying that their credit limit would be dropped from $25,000 to $6,000.

The Byers' life changed when they had a baby. The cute little rental home that was so cozy for newlyweds seemed cramped and uncomfortable with a baby. The backyard had no fence and was covered in gravel. Jill took the baby for a walk to see the local elementary school. She was shocked at how rundown the school was and how rowdy the children were. The school playground's only baby swing was broken and hanging by one chain. Jill decided to do some research online and discovered that the school did poorly on the CSAP tests. With a little one, she now saw her neighborhood with a Mother's eye and she didn't like what she saw.

When John came home from work, they talked about moving and buying a house in another neighborhood that was more kid friendly. They applied for a mortgage and were confident of approval because of their payment and steady work history . Instead, they found out that because they now had used up most of their Visa line of credit, they couldn't get a mortgage. The reasons for wanting to move and buy a home remained.

The Cellars

Charles and Cynthia Cellars have a home in a settled neighborhood in Castle Rock, CO. They moved into the house with 2 small children who have grown up and started families of their own in Florida. During the years the Cellars have lived in their home, they have refinanced twice, and used the money from the refinance to pay for their children's college. Now they have an empty nest and are looking to move to a smaller single family house or townhouse in a city close to their grand kids.

The Cellars have always taken good care of their home and the trees they planted have grown tall. The back yard is a child's delight with a wooden swing set. It is a great house for kids and is in the Douglas County school district. The Cellars got a realtor and put out a real estate sign.

The first few weeks, they had three couples look seriously at the home but no offers resulted. Since then, it seems no one wants to buy their home. An appraisal under federal guidelines would not reflect the charm the home has gained over the years. The realtor suggested a Short Sale to lower the cost, but the Cellars' had heard about deficiency judgments and wanted no part of that. They won't sell it for less than they owe. Cynthia Celler looked at the wooden swing set and wished it could be alive with laughing kids again.

Someday

Someday

Enter the BFP

The Cellars' Realtor heard about something called the Bankless Financing Program or BFP for short. The house could be sold without a new mortgage or appraisal. The Realtor talked to the Cellars' and they decided to take a chance with this new way to sell. The Realtor put an "Owner Will Finance" sign atop the "for sale" sign the next day.

The Byers' drove down to Castle Rock and fell in love with a lovely neighborhood with tall, mature trees. They were resigned to not buying a home but were willing to rent because they still wanted their child to grow up in a nice neighborhood. They drove down the street and saw "Owner Will Finance" catching the sunshine just right. They pulled over. They called the Realtor.

The Byers were able to make the required down payment by taking out $10,000 from each of their IRAs without penalty. They still had taxable income from the withdrawal but the sale qualified for the Federal $8,000 tax credit which paid all of the IRA withdrawal tax and gave them a small refund as well. The down payment paid the realtors, the lawyers, the title insurance, and the set up for an escrow company.

The Byers closed on and moved into their new home about two months later. The house had a fenced backyard with an old swing set that their child loved. They now make monthly payments to an escrow company and the escrow company does the rest. They look forward to their child starting kindergarten in the school down the street. They know that they have 6 years to get a mortgage to finalize the home purchase.

The Cellars moved into a rental town home close to their grand kids after they sold to the Byers. They will buy a town home like it when the Byers' get a mortgage. In the mean time there is a nice park across the street for grand kids to play.

All is well.

Mike Robinson is Senior Partner at Robinson & Henry P.C., a Law Firm in Castle Rock, CO with branch offices in Lakewood, CO and Colorado Springs, CO.