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Financial Consultants Austell GA

The Seller Finance trap begins with a seller who is having trouble finding a buyer. Maybe the park’s vacancy is too high, maybe the location is too rural or in obvious decline. Whatever the cause, the seller can either sit on the park for an eternity, or find a creative way to attract a buyer. And what can be more attractive to a buyer than an easy to qualify, below market interest rate loan.

Norris Edmonson
Beacon Financial Advisers, Inc.
(678) 750-1700
3330 Cumberland Blvd., Suite 500
Atlanta, GA
Expertises
Ongoing Investment Management, Tax Planning, Retirement Plan Investment Advice, Retirement Planning & Distribution Rules, Estate & Generational Planning Issues, Planning Issues for Business Owners
Certifications
NAPFA Registered Financial Advisor, BS, CPA/PFS

Kevin Woods
Gratus Capital Management
(404) 961-6000
1300 Parkwood Circle, Suite 170
Atlanta, GA
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Retirement Planning & Distribution Rules, Women's Financial Planning Issues, Retirement Plan Investment Advice
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NAPFA Registered Financial Advisor, CFP®

Teryl Tornroos
Evergreen Financial Planning, LLC
(678) 763-1372
123 Church Street NE, Suite 250 Denmead Building
Marietta, GA
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Helping Clients Identify & Achieve Goals, Tax Planning, College/Education Planning, Hourly Financial Planning Services, Cash Flow/Budgets/Credit Issues, Retirement Planning & Distribution Rules
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NAPFA Registered Financial Advisor, CFP®, EA

Scott Beaudin
Pathway Financial Advisors, LLC
(404) 812-4979
3715 Northside Parkway, Building 200, Suite 420
Atlanta, GA
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Hourly Financial Planning Services, High Net Worth Client Needs, Ongoing Investment Management, Planning Issues for Business Owners, Estate & Generational Planning Issues, Middle Income Client Needs
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NAPFA Registered Financial Advisor, CFP®, CPA/PFS, MBA

Ray Padron
Brightworth, LLC
(404) 760-9000
3280 Peachtree Road, NE, Suite 2075
Atlanta, GA
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High Net Worth Client Needs, Charitable Giving - Trusts & Foundations, Planning Issues for Business Owners, Retirement Plan Investment Advice, Tax Planning, Professional Athletes or Entertainers
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NAPFA Registered Financial Advisor, CFP®, ChFc, CIMA, CLU, CPA/PFS

B. Alan Gaylor
Alder Financial Group
(770) 563-8240
300 Galleria Parkway, Suite 1650
Atlanta, GA
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Retirement Plan Investment Advice, Ongoing Investment Management, Helping Clients Identify & Achieve Goals, Planning Issues for Business Owners, Planning Concerns for Corporate Executives
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NAPFA Registered Financial Advisor, CFP®, MBA

Jon Houk
JPH Advisory Group, Inc.
(770) 859-0076
600 Galleria Parkway, Suite 1600
Atlanta, GA
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Ongoing Investment Management, Planning Concerns for Corporate Executives, Retirement Plan Investment Advice, Tax Planning, High Net Worth Client Needs, Planning Issues for Unmarried & Same-Sex Couples
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NAPFA Registered Financial Advisor, CFP®

Bobbie Munroe
Fraser Financial
(404) 351-6976
1873 Volberg Street NW
Atlanta, GA
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Helping Clients Identify & Achieve Goals, Ongoing Investment Management, Newlyweds & Novice Investors, Planning Issues for Unmarried & Same-Sex Couples
Certifications
NAPFA Registered Financial Advisor, CFP®

Kyle Flynn
Financial Discovery
(404) 816-0160
4403 Northside Parkway, Suite 1104
Atlanta, GA
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Ongoing Investment Management, Retirement Plan Investment Advice
Certifications
NAPFA Registered Financial Advisor, BA, CFP®

Annika Ferris
Brightworth, LLC
(404) 760-9000
3280 Peachtree Road, NE, Suite 2075
Atlanta, GA
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Planning Concerns for Corporate Executives, Women's Financial Planning Issues, Divorce Planning, Estate & Generational Planning Issues
Certifications
NAPFA Registered Financial Advisor, CFP®, CLU, MBA

Beware of the Seller Finance Trap

BEWARE OF THE SELLER FINANCE TRAP
Sat 08/15/09 08:48:07 pm
by Frank Rolfe

There are few things more attractive about the mobile home park business than seller financing. Non-recourse seller financing allows the buyer to escape the hassle and scrutiny of bank lending, while at the same time offering some degree of insurance against fraud (you have not yet paid the seller in full), the ability to give the park back and walk clean in the event of catastrophe, and often includes a below-market interest rate and longer loan term.  

That being said, there is a trap often used by sellers that is baited with seller financing, and it is important to always be aware of, and stay clear of, this danger. 

The trap begins with a seller who is having trouble finding a buyer. Maybe the park’s vacancy is too high, maybe the location is too rural or in obvious decline. Whatever the cause, the seller can either sit on the park for an eternity, or find a creative way to attract a buyer. And what can be more attractive to a buyer than an easy to qualify, below market interest rate loan. 

Of course, there’s nothing wrong with a below-interest rate seller note. But not when it is used as a trap. And many times, that’s exactly what is being set. 

You see, the seller knows that the park will never hold up to the scrutiny of a bank – the appraisal, the independent review of the numbers, even the negative logic of the loan officer. To keep you from finding out that the park is overpriced, Do the Search or in a bad neighborhood, or basically completely unable to be financed, the seller offers to carry the loan and cuts the bank out of the loop day one. That’s the first leg of the trap.

The second part of the trap is to bait the deal with a super low interest rate to make the park look like it is a profitable investment, even though it could never carry a regular bank debt load of the same size. If a park is a 4% cap, then what better way to disguise the poor performance than with a 2% interest rate on the mortgage? The seller is effectively cooking the books with the buyer’s blessing. When you accept a cash-on-cash return that is spiked by ridiculously low interest rates, then you may be getting into trouble.

The final part of the seller trap is to offer only a short loan term, maybe two to five years, and the below-market interest rate for only the first year or so. What this does is to put the buyer in a negative cash- flow situation almost immediately, and force the round of bank loan requests that normally end in nothing but rejection. Faced with the loan coming due, and no bank loan prospects, the buyer often gives the park back to the seller, less his 20% down payment. There are sellers out there who have sold the same park two or three times under this framework, garnering 60% of their purchase price in down payments, and still owning the park. 

So how do you avoid ...

Click here to read the rest of the article from mobilehome.com

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