Zicarta

Copywriting, Content Marketing, and UX Consulting for a Real Estate Start-up

Summary

Zicarta is an online marketplace where you can buy and sell peer-to-peer financed residential real estate. Since peer-to-peer financing is a relatively niche market, it’s unfamiliar to a large portion of Zicarta’s target audience. I had worked with Zicarta’s founder and CEO, Oke, when he was a marketing manager at Tektronix. So when he began his start-up, he recruited me to help him write webpage copy, blog articles, video scripts, social media posts, and emails that explain peer-to-peer financing and how Zicarta makes it easier than ever.

Below is one of the explainer articles I wrote, Peer-to-Peer Home Financing 101. You can find it on the Zicarta website here.

Peer-to-Peer home financing 101

By: Team Zicarta

What is Peer-to-Peer Home Financing?

If you’ve ever bought a car from a dealership before, or even an appliance from a retailer, you’ve likely been offered in-house financing to pay for your purchase. Instead of spending all the cash up front, you make payments (including interest) to the dealership or retailer over time.

Peer-to-peer (P2P) home financing is exactly like that, except the person selling the home is the one offering “in-house” financing to the buyer. No banks, no bull. The buyer becomes the new owner and makes payments (including interest) directly to the seller over time.

The Benefits of Peer-to-Peer Financing

Cool, so it’s possible to finance a home purchase in a similar way you finance a car purchase. How does that help?

We’ll explore both seller and buyer benefits, so feel free to skip to the section that makes the most sense for you.

Sellers

For sellers, one of the biggest benefits of P2P financing can be tax savings. With traditional home financing, the bank pays the seller a lump sum of cash to purchase the home. If the seller owned the home for more than one year before selling it and the home doesn’t qualify under the primary residence tax exemption, they’ll owe long-term capital gains taxes on the profits. Long-term capital gains taxes are often tens or even hundreds of thousands of dollars, but P2P financing spreads out the income from the sale over time which can dramatically reduce or even eliminate long-term capital gains taxes. We explore the tax benefits of P2P financing in more detail in our User’s Guide to Taxes on Property Sales.

Sellers can also use P2P financing to create a secured income stream and to dramatically increase their profits on the sale with interest that the buyer pays them over time. For example, if you sell your home with P2P financing for $500k at 6% APR over 10 years, you’ll pocket more than $250K in interest alone.

Buyers

For buyers P2P financing can be a more flexible way to purchase a home. Banks tend to be very rigid and strict when it comes to approving home loans, especially when it comes to your credit score and regular income. Because of the volume of loan applications they receive, they don’t often take the time to consider your specific situation.

Some credit scores are lowered by small mistakes that aren’t truly indicative of your actual credit worthiness. And someone’s income from freelancing last year might not look like much to a bank, but if it helped them land an awesome full-time role this year then that can easily be seen as a positive sign for your career, not a negative. P2P financing means the owner of the home is the one reviewing your creditworthiness and they are in a position to give your financial situation the attention to detail it deserves.

Buyers also save money on bank and real estate agent fees and often get through the lending process much faster than with traditional bank mortgages.

The Challenges of Peer-to-Peer Home Financing

P2P financing can have a lot of benefits, but it isn’t the right solution for everyone. Let’s take a look at the challenges for both buyers and sellers. Again, feel free to skip to the portion that’s most relevant to you.

Sellers

The first challenge of P2P financing for sellers is the possibility of foreclosure. Even buyers with strong credit can fall into hard times, and in a situation where they can no longer make payments, the seller will usually need to hire a lawyer (often around $5,000) to initiate a foreclosure. Though it’s not fun for anyone, when the foreclosure process is finished, you have your property back and can sell it to a new buyer. Foreclosure risk can also be minimized with the right due diligence and a strong down payment.

Second, in P2P financing, the seller becomes the lender and thus becomes the “loan originator.” To make sure you don’t have to comply with burdensome regulations, you’ll want to ensure your property sale falls into the “one-property exclusion” of the Dodd Frank Act. This is easy to determine, but is still a hurdle that prevents many from moving forward. If you’ve determined that it’s applicable for you, the one-property exclusion dramatically simplifies the requirements of being a home loan originator. Check out our article on complying with regulations when selling a P2P-financed property to learn more.

Third, realtors tend to avoid P2P-financed homes, and a majority of property buyers rely on traditional bank mortgages. So finding a buyer is often harder when selling property with P2P financing. Don’t worry, Zicarta is changing that. By getting the word out on the benefits of P2P financing and creating a convenient place to buy and sell P2P-financed homes, we’re committed to helping you find the perfect buyer for your property.

Buyers

The first challenge of P2P financing for buyers is that P2P-financed homes tend to have slightly higher interest rates. Here’s the good news though—interest rates are already so low in the current housing market that even with marginally higher interest it’s still an excellent time to buy a home.

The second challenge is that real estate agents typically won’t work with clients who want or need P2P financing. Buyers often represent themselves, which can be complicated without any expert help. Don’t worry, that’s where Zicarta comes in. Our website makes submitting an offer for a home quick and easy, we have plenty more articles and resources like this one to keep things clear, and we’d love for you to reach out directly with any questions.

The third challenge is that not every home is going to be available with P2P financing, so it can be harder to find the right home for you and your family. Zicarta is changing that. We’re working tirelessly to tell more home sellers about the benefits of P2P financing (it’s a great deal for them too). As more and more sellers list their homes on Zicarta, you’ll have more and more options to consider when shopping for your home. Start your search by city here. You might be surprised what you find.

What Exactly is Zicarta?

Zicarta is an online marketplace for buying and selling P2P-financed homes. Homeowners who want to sell their property with P2P financing create a listing on our website with our efficient listing tool, buyers submit offers for those homes with our streamlined offer tool, and when the seller chooses their favorite offer, the buyer and the seller can conduct the entire transaction with our thorough and secure transaction tool. Buyers can even submit their ongoing payments to the seller on our website. Zicarta charges a flat 1% fee on every transaction. No hidden fees, guaranteed.

Our goal is to create a new generation of homeowners by providing an efficient, reliable way to buy and sell homes without involving traditional banks and mortgages.

Still Have Questions?

We hope this has been a helpful introduction to peer-to-peer financing and Zicarta’s mission. But if you still have questions, please feel free to reach out to our team. We’d love to hear from you.

Also, don’t forget to follow us on social media. We’re on Facebook and LinkedIn.